Oil prices rose yesterday to their highest since March 11, supported by lower United States’ crude inventories, supply cuts and recovering demand as governments ease restrictions on people’s movements imposed due to the COVID-19 crisis.
Crude prices had slumped earlier, with the global benchmark, Brent, hitting a 21-year low below $16 a barrel in April as demand collapsed.
But with the relaxation of the lockdowns by governments, rising fuel use and more signs that the supply glut is being tackled, Brent has since more than doubled.
Brent crude for July yesterday rose $1.17, or 3.3 per cent, to $36.92 per barrel, while the United States’ West Texas Intermediate (WTI) crude climbed 96 cents, or 2.9 per cent, to $34.45.
Both benchmarks are at their highest since March 11, following the gradual easing of the lockdowns.
Bloomberg had reported that summer weather was enticing much of the world to emerge from coronavirus lockdowns.
Shops and restaurants were all set to reopen in Italy, while other centres of the outbreaks such as New York and Spain gradually lifted restrictions.
Apart from the lifting of restrictions on movement by countries, which had increased fuel use and enhanced crude demand, lower United States’ inventories have also helped to reduce oil glut and help in price recovery.
Production is also falling as US energy firms cut the number of oil and natural gas rigs operating in the country.
In the latest sign the supply glut is easing, US crude inventories fell by five million barrels last week. Analysts had expected an increase.
Also, there is evidence of recovering fuel use.
British airline, EasyJet, plans to restart some flights on June 15, pointing to higher jet fuel demand.
Physical crude markets, at historic lows just weeks ago, are also rising.
Also supporting oil prices are production cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, a grouping known as OPEC+.
The world’s top exporter, Saudi Arabia, had announced that it would cut an additional one million barrels per day in June, while OPEC+ wants to maintain existing oil cuts beyond June when the group will meet.
Kuwait and Saudi Arabia had agreed to halt oil production from the joint Al-Khafji field for one month, starting from June 1, Kuwait’s Al Rai newspaper had reported.
OPEC, Russia and other allies, known as OPEC+, agreed to cut supply by a record 9.7 million barrels per day (bpd) from May 1 to support the market.
So far in May, OPEC+ has cut oil exports by about 6 million bpd, according to companies that track the flows, suggesting a strong start in complying with the deal. OPEC has disclosed that the market has responded well.