An oil refinery worker is seen cycling past storage tanks. Picture: REUTERS / DARREN WHITESIDE
An oil refinery worker is seen cycling past storage tanks. Picture: REUTERS / DARREN WHITESIDE

Singapore — Oil prices climbed by more than $1 a barrel on Monday to their highest in more than a month, supported by ongoing output cuts and signs of a gradual recovery in fuel demand as more countries ease curbs imposed to stop the coronavirus pandemic spreading.

Brent crude was up $1.19, or 3.7%, at $33.69 a barrel by 4.40am, after touching a high since April 13. US West Texas Intermediate crude was up $1.26, or 4.3%, at $30.69 a barrel, after rising to its highest since March 16.

“Oil prices may show further upside momentum as the easing in mobility restrictions grows,” said Stephen Innes, chief global market strategist at AxiCorp in a note, referring to curbs that were designed to counter the coronavirus.

The June WTI contract expires on Tuesday, but there was little sign of WTI repeating the historic plunge below zero seen last month on the eve of the May contract’s expiry amid signs that demand for crude and derived fuels is recovering from its nadir.

Production is also falling as US energy firms cut the number of oil and natural gas rigs operating to an all-time low for a second consecutive week. That partly helped ease concerns about the WTI contract’s delivery point in Cushing, Oklahoma, running out of space.

“Given particularly that surprise draw that we saw on inventories last week in the US, it seems unlikely that those concerns about storage facilities will reassert themselves,” Michael McCarthy, chief market strategist at CMC Markets in Sydney said.

The Chicago Mercantile Exchange, which hosts trading in WTI futures, brokerages and the US Oil Fund LP, the country’s largest oil-focused exchange-traded product, have all taken steps that reduce open positions ahead of the WTI contract’s expiry.

The positive mood was reinforced as US Federal Reserve chair Jerome Powell issued an optimistic outlook for economic recovery later this year.

“Assuming there is not a second wave of the coronavirus, I think you will see the economy recover steadily through the second half of this year,” Powell said on Sunday night in broadcast remarks.

Also supporting oil prices are production cuts by Opec and its allies, including Russia, a grouping known as Opec+.

The world’s top exporter, Saudi Arabia, announced last week that it will cut an additional 1-million barrels per day in June, while Opec+ wants to maintain existing oil cuts beyond June when the group is next due to meet.

Kuwait and Saudi Arabia have agreed to halt oil production from the joint Al-Khafji field for one month, starting from June 1, Kuwait’s Al Rai newspaper reported on Saturday.

Reuters