On Tuesday, oil prices surged as some governments around the world have started to ease lockdowns.
Brent crude oil futures soared by 13.9% or USD3.77 to settle at USD30.97/barrel while the US WTI skyrocketed by 20.5% or USD4.17 to close at USD24.56/barrel. Brent crude had been gaining to six days in a row while WTI had rallied for five straight sessions.
Fuel demand is showing a moderate increase as some governments have taken measures to lift travel restrictions. In the after-hours trading, prices extended the gains despite the unexpectedly higher weekly build in the US crude stockpiles, as the gasoline inventory showed a surprisingly large drop.
Late on Tuesday, the American Petroleum Institute (API) reported the US crude inventories to soar by 8.4 million barrels in the week ended April 30. Analysts only expected a build of 7.8 million barrels.
However, as API also reported the deeper-than-expected fall in gasoline stocks, by 2.2 million barrels, the market started to view some signs that demand has begun the recovery.
Analyst Phil Flynn of Price Futures Group commented that the market, apparently, had just started to realize that with the reopening of activities in some economies, demand is going to improve.
UBS analyzed that the easing of restrictions would push for the balance in supply and demand, which could lead to a shortfall in supply by the last quarter of 2020.
Another positive view came from Morgan Stanley, forecasting that the global market had likely reached the peak of oversupply. The bank predicted that the inventory gains have not been quite as strong as expected.
However, CEO of Vitol, Russell Hardy estimated that the long-term peak demand might be permanently eroded as in April oil demand shrank by 26 million bpd to 27 million bpd, which drives a fall of more than 8 million bpd year-on-year fall.
Moreover, air traffic is unlikely to recover in the near future. Therefore, the recovery of fuel demand will likely be slower.
