Oil Prices Extend Gains on Demand Hopes as Lockdowns ease

By Noah Browning
Tuesday, May 5, 2020

Oil prices jumped again on Tuesday on hopes for a recovery in vehicle traffic and fuel demand as some European and Asian countries along with several U.S. states began to ease coronavirus lockdown measures.

West Texas Intermediate (WTI) crude futures were 7.75%, or $1.58, higher at $21.97 per barrel by 0820 GMT. The U.S. benchmark has closed higher for the last four sessions.

Brent crude futures were up 5.5%, or $1.49, at $28.69.

Italy, Spain, Nigeria, and India, together with Ohio and other U.S. states, began allowing some people to go back to work and opened up construction sites, parks and libraries.

Vehicle traffic in most of the United States, including those yet to lift shelter-in-place orders, has also rebounded, RBC Capital Markets research said in a note.

Swiss bank UBS said the easing of restrictions would help lead to a balance in supply and demand for the oil market in the third quarter and even projected an undersupply by the fourth, forecasting an end-2020 recovery of Brent to $43 per barrel and $55/bbl by mid-2021.

"The outlook for this and next year is turning brighter: demand should be supported by a recovering global economy," UBS commodities analyst Giovanni Staunovo said.

Reflecting hopes that the oil industry may have passed the worst of coronavirus-induced lockdowns, hedge funds, and money managers were buyers of petroleum derivatives for a fifth straight week in the week ended April 28.

Still, global oil demand and prices suffered historic losses in April, and recovery is likely to be slow with air traffic not expected to rebound any time soon.

Australian national carrier Qantas Airways' Chief Executive Alan Joyce said on Tuesday that "international travel demand could take years to return to what it was."

"Travel demand is essentially zero for the foreseeable future," United Airlines Holdings Inc spokesman Frank Benenati said. The Chicago-based carrier plans to cut at least 3,400 management and administrative positions in October.

With Saudi Arabia, Russia other major producers and companies slashing output, the market shrugged off a decision by a Texas energy regulator to abandon a proposal for a 20% output cut in the United States' biggest oil-producing state.

U.S. crude oil stockpiles were seen rising for a 15th consecutive week, while inventories of oil products also likely built last week, a preliminary Reuters poll showed.

Citi analysts expect that as demand returns significant production curtailments will turn the record inventory builds of the second quarter into record draws in the third quarter.

 (Reporting by Shu Zhang in Singapore and Sonali Paul in Melbourne; Editing by Kirsten Donovan)

Categories: Activity Production Oil Price

Related Stories

Yinson Production Secures $1.17B Refinancing for FPSO Maria Quitéria

Japan Protests China’s New Oil and Gas Construction Activities in East China Sea

CNOOC Signs Hydrocarbons Exploration and Production Deal with Kazakhstan

Thailand's PTT to Buy LNG from Glenfarne's Alaska LNG Project

Wood JV Gets EPC Job for Shell off Brunei

Chuditch Gas Field Drilling Ops Get Delayed to Next Year

Indonesia's Medco Starts Production at Natuna Sea Fields

CNOOC Puts Into Production New Oil Field in South China Sea

Pakistan’s OGDC to Start Production at ADNOC’s Offshore Block by 2027

CNOOC Sees 11% Profit Growth in 2024 Driven by Record Oil Production

Current News

PTTEP Hires Velesto’s Jack-Up Rig for Drilling Campaign off Malaysia

Yinson Production Secures $1.17B Refinancing for FPSO Maria Quitéria

Centrica and Thailand’s PTT Ink Long-Term LNG Supply Deal

Petrovietnam, Partners Sign PSC for Block Off Vietnam

Japan Protests China’s New Oil and Gas Construction Activities in East China Sea

CNOOC Signs Hydrocarbons Exploration and Production Deal with Kazakhstan

Thailand's PTT to Buy LNG from Glenfarne's Alaska LNG Project

Woodside and Jera Agree LNG Cargoes Supply for Japan’s Winter Period

Petronas Expands Suriname Portfolio with Deepwater Block Acquisition

Japanese Oil and Gas Firm Enters Two Blocks off Malaysia

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com