Oil Rises for Fifth Day After Report Shows Market Is Rebalancing

The oil market is still in much better shape than a month ago as output cuts have kicked in and pockets of demand have emerged.

Olivia Raimonde

21 May 2020, 03:51 AM IST

Oil Rises for Fifth Day After Report Shows Market Is Rebalancing

Storage tanks and stacks stand at the Caltex Australia Ltd. Lytton Oil Refinery near the Port of Brisbane in Brisbane, Australia. (Photographer: Ian Waldie/Bloomberg)

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

Futures in New York for July delivery rose 4.8% Wednesday. The U.S. Energy Information Administration showed crude oil inventories declined for the second week in a row and the Cushing, Oklahoma, hub saw a record draw of 5.6 million barrels. But a surprise 2.8 million barrel increase in gasoline stocks reflected ongoing weakness in demand.

“U.S. production is adjusting to the lower demand which is helping to keep inventory levels from reaching the concerns everybody had of reaching capacity,” Rob Thummel, portfolio manager at Tortoise, said in a phone interview. The increase in gasoline inventories is a short-term indicator that demand didn’t rise as much as everyone was expecting last week, he said.

The record draw in Cushing sent a bullish signal to traders. The so-called WTI June/July cash roll traded at 30 cents Wednesday, the first time it’s been in above zero since December, according to Bloomberg data. The price signals that a U.S. supply glut that’s sent benchmark oil spiraling in recent months may be diminishing.

Prices:
WTI for July delivery rose $1.53 to settle at $33.49 a barrel in New York Brent for July settlement advanced $1.10 to $35.75 a barrel Gasoline futures fell 0.14 cents to $1.0438 per gallon

WTI prices have climbed this month amid the nascent recovery in demand and reductions in supply. Frontline Ltd. sees global oil production cuts reversing as early as the second half of 2020, depending on demand and Federal Reserve Bank of Dallas President Robert Kaplan said during an interview on Bloomberg Television that U.S. oil shut-ins may be at their peak right now.

“If you get a little bit of extra demand, suddenly everybody is turning the taps up,” said Michael Hiley, head of over-the-counter energy trading at LPS Futures. “So, the supply could very quickly overwhelm the demand.”

More oil-market news
From the Middle East to Siberia, the North Sea down to Latin America, the prices of physical cargoes of crude oil are rallying hard almost everywhere, underpinning a surge in headline futures markets. Now, though, attention is turning toward just how sustainable the recovery will really be. For ordinary investors, it was perhaps the most spectacular demonstration of the unique perils of trying to wager on the price of oil. The Trump administration has granted at least 76 petitions to cut royalty payments for oil and natural gas produced on public land in Utah -- a move condemned by critics as encouraging production the market doesn’t need.

More oil-market news

From the Middle East to Siberia, the North Sea down to Latin America, the prices of physical cargoes of crude oil are rallying hard almost everywhere, underpinning a surge in headline futures markets. Now, though, attention is turning toward just how sustainable the recovery will really be.
For ordinary investors, it was perhaps the most spectacular demonstration of the unique perils of trying to wager on the price of oil.
The Trump administration has granted at least 76 petitions to cut royalty payments for oil and natural gas produced on public land in Utah -- a move condemned by critics as encouraging production the market doesn’t need.