Oil futures edged higher Tuesday, finding support on hopes that falling production levels and a slow revival in demand as countries begin to loosen restrictions on movement, imposed to contain the COVID-19 pandemic, will begin to drain a global glut of crude that has slammed prices in 2020.
West Texas Intermediate crude for June delivery rose $1.38, or 5.7%, to $25.52 a barrel, on the New York Mercantile Exchange, while July Brent crude, the global benchmark, was up 89 cents, or 3%, at $30.52 a barrel on ICE Europe.
Oil ended lower Monday, despite Saudi Arabia moving to deepen its production cut in June, a move that was echoed by some other Gulf producers. Saudi oil production for June, with the output-cut agreement between the Organization of the Petroleum Exporting Countries and its allies as well as the voluntary cuts, will total 7.492 million barrels per day, the Saudi Press Agency reported Monday. But analysts said the effort, combined with a slowdown in production in response to this year’s collapse in prices could provide support.
Traders are also looking for signs that renewed economic activity is starting to lift demand for gasoline and, in turn, crude. Oil demand cratered as economies virtually closed down in an effort to contain the outbreak.
Oil could find further support if data from the American Petroleum Institute late Tuesday shows a decline in crude oil stocks at the New York Mercantile Exchange’s delivery hub in Cushing, Oklahoma, as was reported last week by a private information provider, said Eugen Weinberg, analyst at Commerzbank, in a Tuesday note.
In addition, the U.S. Energy Information Administration will publish new projections on U.S. oil output which is likely to show a further downward revision in view of a steep decline in drilling activity and production cuts announced by several oil companies, he said.