(Bloomberg) Brent crude rose above $40 a barrel as broader markets rallied on stimulus from the Federal Reserve and physical supplies continued to look tight.Futures in London rose for a second session. India’s oil minister said consumption in the first half of June had recovered to levels about 15% to 20% below a year ago, the latest sign of a recovery in global consumption. It came as the International Energy Agency warned in its monthly report that fuel use will remain 2.5% lower next year than in 2019, mostly because of a slow rebound in jet fuel consumption.Those concerns are being partly assuaged as the U.S. Federal Reserve said it would start buying a broad portfolio of corporate bonds, aiding sentiment across financial markets. At the same time, there’s evidence OPEC+ members are complying with extended production curbs. Saudi Arabia cut term supplies to some Asian refiners by as much as 40% and Iraq said it will make deep reductions.
Brent crude has rebounded rapidly since April as the OPEC+ production cuts kicked in and U.S. production fell. While the rally fizzled out last week over fears of a second coronavirus wave, physical crude markets in Europe have continued to strengthen. A White House plan to spend nearly $1 trillion on infrastructure could be positive for prices if it materializes.
“Massive stimulus around the world will stimulate a rebound,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “Equities higher, oil price higher. All on the up.”
West Texas Intermediate crude for July delivery rose 2% to $37.85 a barrel as of 12:40 p.m. in London
Brent for August delivery added 2.1% to $40.55 a barrel
In a sign that U.S. fuel demand may be improving, gasoline futures are once again rallying when massive oil refineries shut down. Houston gasoline climbed to a three-month high Monday after Motiva Enterprises LLC shut a key unit at the largest U.S. refinery in Port Arthur, Texas. Meanwhile, shale production is still in retreat, with the Energy Information Administration forecasting it will fall further next month.
OPEC and its allies have agreed to maintain production cutbacks amounting to about 10% of global supply through next month, and will hold committee meetings on Wednesday and Thursday to assess their impact. So far this month, shipments from Saudi Arabia have remained muted, with flows to the U.S. dropping dramatically.
Other oil-market news
Oil-production limits adopted by OPEC+ will soon bring prices back to “normal,” according to the oil minister from the United Arab Emirates.
The coronavirus has exposed the fragility of some of the world’s biggest oil and gas companies, but also given them the opportunity to make investors swallow some unpleasant remedies.
EnergyNow is an online energy news and data media service dedicated to providing essential up to-date information on the United States energy industry.
We provide live feeds designed to help energy professionals, field personnel, business owners, and senior business leaders get the latest energy news and data, energy industry press releases and energy job and event listings.
Help us to improve EnergyNow, Give us your feedback