By Barani Krishnan
Investing.com – After the cabin fever of the past two months, Americans are taking to the reopening from coronavirus shutdowns with force, driving risk appetite up broadly across Wall Street and into crude prices.
West Texas Intermediate crude’s front-month contract, July, settled up $1.10, or 3.3%, at $34.35 per barrel as U.S. markets resumed trading after Monday’s Memorial Day holiday. WTI earlier reached $34.80, its highest since March 10.
The New York Stock Exchange also partially reopened its trading floor for the first time in two months, helping Wall Street extend its recovery rally from the pandemic.
Brent, the London-traded global benchmark for oil, settled up 64 cents, or 1.8%, at $36.17.
Oil markets were also supported by signs of discipline among OPEC members to carry through with reduced production quotas ahead of a meeting with Russia to discuss an extension cuts beyond June, Reuters reported, citing sources.
Russia’s Energy Ministry Alexander Novak also said a rise in fuel demand should help to cut a global surplus of about 7 million to 12 million bpd by June or July. Moscow’s RIA news agency said Russian oil production volumes were near the country’s target of 8.5 million bpd for May and June.
U.S. oil production, which has steeply declined as low prices forced shut-ins, will reach a bottom of around 10.7 million bpd in June, a two-year low, before it starts to slowly recover, Rystad Energy said in an estimate.
WTI prices received another fundamental boost from Friday’s weekly rig count published by industry firm Baker Hughes, which showed drillers cut another 21 oil rigs. That reduction brings to nearly 450 the number of rigs lost since the week ended March 18, when lockdowns over the coronavirus began earnestly in the United States and across the world after China started the phenomenon in January.
Seevol.com, meanwhile, reported a 4.26-million-barrel decline for the week to May 22 at the Cushing, Okla. hub that stores crude delivered against expiring spot contracts of WTI. If accurate, that decline will add to the previous week’s drop of 5.8 million barrels at Cushing reported by the Energy Information Administration. The drain in Cushing inventories has been one of the drivers for WTI’s relative outperformance against its London-traded rival, Brent, over the past month.
“There are only 22 rigs left in the Eagle Ford basin, and the Permian is approaching the lows of 2016,” said Olivier Jakob at Zug, Switzerland-based oil risk consultancy PetroMatrix. “The U.S. production estimates will continue to be revised lower in the EIA reports.”
Jakob said U.S. crude refinery runs were also expected to increase further this week as gasoline demand makes a comeback with the beckoning summer.
“WTI crude oil time-spreads should stay supported as the stock pressure on Cushing is abating,” he added.
U.S. Oil Flirts With $35 on Recovery Optimism
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