By Barani Krishnan
Investing.com - Talk of global output cuts are energizing oil bulls to keep U.S. crude prices above $25 per barrel despite domestic production appearing to be creeping higher from the market’s two-week long rally.
Demand for gasoline wasn’t clear either in U.S. states emerging from coronavirus-forced lockdowns, analysts said.
June WTI, the benchmark for U.S. crude, settled up $1.64, or 6.8%, at $25.78 per barrel. It hit a session peak of $26.23 earlier, responding to the pledge by the United Arab Emirates and Kuwait to cut 180,000 barrels a day collectively from their output in June.
The UAE and Kuwaiti announcements came after Saudi Arabia said Monday it planned to cut June oil production by an additional 1 million barrels per day to 7.5 million bpd — the lowest level since 2002.
London-traded Brent for July delivery, the global benchmark for oil, settled up 35 cents, or 1.2%, at $29.98. It hit a session high of $30.69 earlier.
“The market ‘feels’ less long to me than it should be, but I have an aversion to buying strength in a market with serious amounts of macro risks driven by a virus that we still know little about,” said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, N.C.
The rally in WTI continues ahead of Wednesday’s weekly supply-demand report from the Energy Information Administration, which is expected to show slowing builds in U.S crude and distillates and smaller declines in gasoline
Shut-in wells In the Permian Basin’s Midland region, one of the largest U.S. shale oil basins, have, meanwhile, started reopening, Mackie McCrea, chief commercial officer at pipeline giant Energy Transfer (NYSE:ET), told a conference call on Monday.
About 8% of oil volumes that fed Energy Transfer’s pipe network in the Midland had been shut at the start of the month, Bloomberg reported. As of the start of this week, some 25% of that was back, McCrea said.
The U.S. Energy Information Administration, meanwhile, cut its 2020 world oil demand growth forecast by 2.9 million bpd to 8.13 million.
In its monthly forecast, the agency raised its oil demand growth estimate for 2021 by 580,000 bpd to 6.99 million.