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Oil Edges Higher to $32 With Market’s Demand Recovery Extending


By Ann Koh and Alex Longley

(Bloomberg) Oil rose for a fifth day as investors weighed signs the market is rebalancing against what’s still a precarious economic outlook.

Futures in New York for July delivery gained to above $32 a barrel. A report that a virus vaccine study didn’t produce enough critical data to assess its success added some caution to markets, which have been buoyed by a rebound in demand and sharp reductions in supply. Data in the U.S. and Europe pointed to declining stockpiles.

The oil market is in much better shape than it was a month ago as output cuts have kicked in and pockets of demand have emerged. There was no repeat of April’s plunge below zero when the West Texas Intermediate contract rolled over, with the June futures trading at a premium to July before they expired, suggesting concerns the U.S. would run out of storage have eased.

Front- and second-month WTI contracts trading at similar levels

“Demand is now clearly on its way back from extremely low levels in April,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “The direction for oil is most likely still higher from here.”

Prices:
  • WTI for July delivery added 0.7% to $32.17 a barrel as of 12:05 p.m. in London
  • Brent for July settlement rose 1.4% to to $35.13 a barrel

In more evidence the supply response to the virus is gathering pace, the American Petroleum Institute reported stockpiles at the storage hub at Cushing, Oklahoma, fell by 5.04 million barrels last week, people familiar with the data said. U.S. crude inventories dropped by 4.84 million barrels, the API said. The official Energy Information Administration figures are due later on Wednesday.

Still, any continued rally in oil could be self-defeating as it would encourage output to return when demand is still shaky, UBS AG said in a note.

More oil-market news
  • Canadian and Alaskan crude that normally travels to the U.S. West Coast is finding a market in China, where demand is almost back to pre-pandemic levels.
  • Two mainstay cross-Atlantic trades — exporting surplus European gasoline to the U.S. and sending American diesel in the opposite direction — have collapsed as the virus pummeled fuel demand.
  • Royal Dutch Shell Plc has forced a $500 million speculative oil fund to shut down amid increased scrutiny of how retail investors are punting in the oil market.


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