Oil rises as coronavirus curbs ease, setting stage for demand boost

An oil pumping jack also known as'nodding donkey, stands in an oilfield near Almetyevsk Tatarstan Russia. Image Andrey Rudakov  Bloomberg

An oil pumping jack also known as'nodding donkey, stands in an oilfield near Almetyevsk Tatarstan Russia. Image Andrey Rudakov Bloomberg

Oil dropped 4% to below $30 a barrel on Wednesday as US crude stockpiles ticked up and diesel inventories swelled, offsetting OPEC-led cuts in production and hopes for a recovery in demand as some countries ease coronavirus lockdowns.

Global benchmark Brent crude settled 13.86% higher at $30.97 per barrel and also posted its fifth consecutive positive session.

Crude oil rallies again (CL1:COM) and is on track for its best week in history, supported by bullish factors including USA companies cutting production, Saudi Arabia raising its official oil selling price and gasoline demand improving as economies around the world reopen.

WTI oil prices are on track to a 10% decline on Wednesday after having rallied around 50% over the previous six days, from $12.70 on late April to the highest price in almost a month at 27.95.

However, crude is still being pumped into storage, raising the prospect that any gains prompted by stronger demand will be capped.

Demand, which indeed now is on the recovery road, is not yet enough to balance the produced oil and that oil has to go somewhere. "There are green shoots there but I think the market will need to see those broaden and extend to sustain the rally", said Lachlan Shaw, head of commodities research at National Australia Bank in Melbourne.

New Zealand to ease some coronavirus restrictions from Thursday
Today's cases bring New Zealand's combined total of confirmed and probable COVID-19 cases to 1,497. There 1386 people reported as having recovered from COVID-19, an increase of 15 on yesterday.

Another positive trigger for oil today was the production cuts several major crude producers have started implementing since the beginning of this month.

Italy finally eased lockdown restrictions with strict guidelines after two months.

USA gasoline stocks fell for a second week as some US states eased lockdowns that had sharply hit traffic. On top of that, weekly gasoline supplied, an indicator of consumption, rose by 804,000 barrels a day last week, the biggest bump since June 2018, according the U.S. Energy Information Administration.

USA jobless claims, meanwhile, continued to rise, although at a slower pace with 3.2 million more people seeking unemployment benefits for the week ended May 2.

"The apparent de-escalation of potential trade hostilities from this morning's U.S".

"Production cuts and soft reopenings all over the place are having the desired effects", said Craig Erlam, senior market analyst at Oanda Europe.

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