Oil rallied as stronger consumption continued to push physical markets higher, even as many countries struggle to bring the coronavirus under control.
Futures in New York traded above $40 a barrel on Friday and are up about 11% this week. Oil traders Vitol Group and Trafigura Group and exporter Saudi Aramco all talked up the strength of the demand recovery in recent days, and prices for some of the world’s major oil products have begun to roar higher.
Gasoline futures in the U.S. moved into backwardation for the first time in three months on Thursday, a bullish signal indicating supplies are tightening as the summer driving season gets under way. Meanwhile, swaps in the North Sea market that prices much of the world’s crude jumped on Thursday as traders posted several bids for cargoes but only one willing seller emerged.
“OPEC+ has done a good job turning things around and stronger demand also helps,” said Carsten Fritsch, an analyst at Commerzbank AG.
Apart from the virus, the other major threat to oil prices comes from suppliers re-opening shuttered production too early. U.S. producer Continental Resources Inc. said Thursday it will start bringing back some of its idled oil output next month, but will keep about 50% curtailed.
“Oil prices find a lot of support in line with equity markets,” said ABN Amro’s senior energy economist, Hans van Cleef. “Risk-on mode is supportive for commodities.”