Oil prices rose further early Tuesday after the gains recorded at the previous session as more countries began to ease coronavirus lockdowns and crude supply cuts gained traction.
Fuel demand around the world had crumbled by an estimated 30% in April, largely caused by movement restrictions and weak consumption is envisaged to affect the market for months despite output cuts by major oil-producing countries and companies.
Yet, experts believe that swift action by such parties might help reduce the current saturation in the market more quickly.
As of 07:08 West African Time, Brent crude, the benchmark for Nigerian oil grades, had gained $1.35 or 4.96%, selling at $28.55 per barrel.
U.S. West Texas Intermediate (WTI) jumped by $1.81 or 8.88% to $22.20 a barrel.
Nigeria’s premium oil grade, Bonny Light, went up by 24 cents or 1.28% to $18.94 per barrel at Monday’s session, according to oilprice.com.
“The bigger picture, while not great, is looking more constructive as countries around the world are reopening and that’s going to increase oil demand at the same time OPEC-plus is cutting production and production is falling elsewhere around the world due to economics,” said Andy Lipow of Lipow Oil Associates in Houston.
Italy, Finland, Nigeria and a couple of U.S. states were among some countries that moved to ease lockdowns on Monday in an effort to revitalise their economies even though officials warned against moving too fast as COVID-19 cases surpassed 3.5 million and deaths approached one quarter of a million globally.
Goldman Sachs said it was optimistic oil prices would rise next year on the account of lower crude production and partial rebound in oil demand.
The bank ramped up its 2021 projection for Brent from $52.50 per barrel to $55.63 and raised that of WTI from $48.50 to $51.38.
The re-emergence of trade tensions between the U.S. and China however limited the rise in prices.
“Demand growth in China is good for the energy market right now, it is pretty much the only game in town. Even a verbal scrap with President Trump is not good for China demand growth, considering the fragile circumstances the market is currently operating under,” said Bob Yawger, Director of Energy Futures at Japan’s Mizuho Bank.