Oil prices extend gains as lockdowns ease

Italy, Spain, Nigeria, India open up construction sites, parks and libraries

LONDON: 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 US states began to ease coronavirus lockdown measures.

West Texas Intermediate (WTI) crude CLc1 futures were up 9.6%, or $1.95, at $22.34 per barrel at 1,000 GMT. The US benchmark has closed higher for the last four sessions.

Brent crude LCOc1 futures were up 7.4%, or $2.02, at $29.22 a barrel.

Italy, Spain, Nigeria and India, together with Ohio and other US 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 per barrel 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.

Morgan Stanley said the peak of oversupply in global markets had likely been reached and a storage crunch was abating.

“Inventories have built but not quite as strongly as feared. With social distancing measures ramped up in March ... the observed inventory increases have not been quite as strong as feared,” it said in a note.

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.”

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.

US 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.