Oil producers have agreed on a one-month extension through July of a record 9.7-million barrels a day output cut. Picture: REUTERS
Oil producers have agreed on a one-month extension through July of a record 9.7-million barrels a day output cut. Picture: REUTERS

Melbourne/Singapore — Oil prices climbed on Tuesday as the easing of coronavirus lockdown measures across the globe lifted traders’ hopes for a swift recovery in demand, though gains were capped by the spectre of persistent oversupply in the market.

Brent crude futures rose 0.3%, or 14c, by 4.35am GMT to $40.94 a barrel. The benchmark contract fell $1.50 on Monday, snapping a seven-day streak of gains.

US West Texas Intermediate (WTI) crude futures rose 0.7%, or 26c, to $38.45 a barrel, after dropping by $1.36 on Monday.

“With Brent holding very nicely above $40, there is talk among traders that WTI will test that level soon,” said Michael McCarthy, chief market strategist at CMC Markets.

Goldman Sachs has raised its 2020 oil price forecasts, with Brent seen at $40.40 a barrel and WTI at $36 a barrel.

Tuesday’s gains came as New York, the US city hardest hit by the coronavirus outbreak, began reopening on Monday after about three months, potentially spurring fuel demand.

US crude and fuel inventories are estimated to have fallen by 1.5-million barrels and about 100,000 barrels respectively in the week to June 5, a preliminary Reuters poll showed ahead of a report from the American Petroleum Institute industry group later on Tuesday.

However distillate inventories, which include diesel and heating oil, were seen rising by 2.9-million barrels.

“You have demand recovering gradually but steadily,” said Lachlan Shaw, head of commodity research at National Australia Bank. “However there’s still huge excess supply, so Opec and friends need to control barrels coming into the market.”

The Organisation of the Petroleum Exporting Countries (Opec), Russia and other producers, a grouping known as Opec+, on Saturday agreed on a one-month extension through July of a record 9.7-million barrels a day output cut.

However, Saudi Arabia said on Monday the kingdom and its allies Kuwait and the United Arab Emirates would not extend an additional 1.18-million barrels a day in cuts on top of the Opec+ cuts in July.

Meanwhile Libya’s National Oil Corporation (NOC) told employees to shut its Sharara oilfield just hours after maintenance operations started as an “armed force” had entered the site.

“It seems pricing in consistent Libya production might be premature,” said Edward Moya of Oanda. “The oil market could easily go back into deeply oversupplied territory, so any threats to production should help stabilise prices.”

Reuters

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