Oil futures rose on Thursday, adding to recent gains that have pushed both the international and the U.S. contracts to around 2 ½ month peaks as a slowdown in supplies and hope for higher demand help recover some losses from a bruising stretch for crude-oil bulls.
In May thus far, reductions to output have helped to cut some 6 million barrels a day in oil, Reuters reported, citing companies that track crude flows.
Commodity experts point to Wednesday’s data from the Energy Information Administration that showed crude stocks at the storage hub in Cushing, Okla., fell by about 5.5 million barrels for the week. The data also represented a second weekly decline in overall U.S. crude stockpiles, helping to ease concerns over tightening storage space that had contributed to a precipitous downturn in the price of the commodity.
“Given the level of production cuts at this point and the improving economic prospects, there’s no reason it can’t continue to climb higher,” wrote Craig Erlam, senior market analyst at brokerage Oanda in a Thursday research note. He estimated that “although it may soon start to lose momentum given the sheer size of the bounceback we’ve seen. The next big test to the upside, above $35, is $37.50 and then $40.”
July West Texas Intermediate oil rose 73 cents, or 2.2%, at $34.22 a barrel on the New York Mercantile Exchange, following a 4.8% rally on Wednesday that pushed the U.S. benchmark to its highest finish since March 10, based on the front-month contracts, according to Dow Jones Market Data.
Meanwhile, global benchmark Brent crude for July delivery added 71 cents, or 2.2%, to reach $36.46 a barrel on ICE Futures Europe—extending its climb to its highest trade since March 11.
So far this month, WTI has climbed 82%, while Brent oil has rallied by nearly 38% in May.
“Oil prices continue to push higher after data showed a second weekly drop in US inventories,” Jasper Lawler,
Demand is coming back slowly as business lockdowns gradually end with the coronavirus pandemic receding, while OPEC+ production cut and lower shale output has reduced the excess in supply, head of research at London Capital Group, wrote in a research note Thursday.
An agreement between the Organization of the Petroleum Exporting Countries and their allies to cut some 9.7 million barrels a day in oil through the end of June has helped to stem a flood of crude against a backdrop of demand that had been declining.
Adding further hope to a recovery from the deadly pandemic Thursday, data in Europe showed improvement.
Preliminary composite readings on business activity in the eurozone, showed that France purchasing managers index rose to 30.5 in May from 11.1 in April, while the flash Germany PMI composite index rose to 31.4 from 17.4, and the flash U.K. composite index rose to 28.9 from 13.8 in April. Any reading below 50 indicates deteriorating conditions.