Oil jumped to levels not seen since Covid-19 lockdowns paralyzed the world’s largest economy as Chinese demand returned and signs of a viable vaccine sparked optimism.
Futures in New York climbed as much as 13.2% Monday. Chinese oil use is at 13 million barrels a day, just shy of the levels of a year earlier, traders and executives said. Moderna Inc. reported promising early results from an experimental vaccine, tempering fears of a virus resurgence and offering hope that economies can safely reopen.
“If China can get back to pre-Covid demand levels, and China is, at least from a virus standpoint, about two months ahead of everybody else, then the oil market is interpreting that as there is light at the end of the tunnel for us too,” Stewart Glickman, energy equity analyst at CFRA Research in New York said referring to U.S. demand.
American shale drillers reduced rigs to the least in more than a decade and Russia pledged strict compliance with the record OPEC+ cuts. Saudi Arabia didn’t give extra volumes of oil to three Asian customers who asked for it, according to refiners.
“Initially it’s positive pretty much across the board,” Glickman said referring to a return of demand. “The problem becomes what if reopening the economy leads to a second wave of cases and then you have a ratcheting back where everyone has to re-hunker down.”
It’s not just China that’s seeing a recovery in consumption. Indian diesel sales were 75% higher during the first half of May, compared with a month earlier. U.K. road fuel use has risen this month and is increasing every week, according to Brian Madderson, chairman of the Petroleum Retailers Association.
At the same time, OPEC+ oil shipments have seen a “stunning reversal” in May, according to market intelligence company Kpler. Exports have fallen by 6.4 million barrels a day so far this month, it said.
Source: Bloomberg
Comments (0)