Oil edged higher as signs of a recovery in demand continued. To surface following the easing of virus-led lockdowns in some regions. While Saudi Arabia pledged to chop production further.
Futures rose 1 percent in NY after falling Monday. Pockets of fuel demand are beginning to emerge in India and China, and while an enormous glut remains. Global stockpile builds are beginning to slow.
The surprises move to deepen daily
Saudi Arabia announced a surprise move to deepen daily. Output cuts by another 1 million barrels, which was followed by smaller reductions from OPEC allies the United Arab Emirates, and Kuwait.
Oil remains down about 60 percent this year with little clarity over. When global consumption is going to be back to pre-virus levels. China has seen a gentle recovery in aviation and traffic in its capital city. But in Europe, various degrees of lock-down still hobble consumption. In the US, an OPIS report showed that the quantity of fuel sold by retailers across the state rose just over 7 percent within the week ended May 2. However, the rebound remains far below 2019 levels.
Crude fell Monday amid doubts over Saudi Arabia’s ability to implement the additional cuts. While some suggested the move was indicative of the market’s underlying weakness. There also are concerns a resurgence of coronavirus cases may lead to tightening restrictions and an extra hit to demand.
However, there are signs the oil market is positioning itself for a recovery. US shale drillers have cut the number of active rigs to the lowest since 2009, trimming output further. This comes as OPEC+ slashes output by almost 10 million barrels a day in an effort to reduce a glut.
“It doesn’t take much of a requirement slip to push inventories to the danger of being at full capacity,” said Michael McCarthy. Chief strategist at CMC Markets Asia Pacific. “Production cuts will address that over the medium term, but what happens within the short term is that the worry. there’s an argument that oil is trading above its equilibrium prices.”