Oil Rallies on Hopes for Economic Recovery -- Update
May 26 2020 - 3:48PM
Dow Jones News
By Amrith Ramkumar
Oil prices climbed Tuesday, rising alongside stocks with more
states and countries easing lockdown measures and boosting demand
for fuel.
U.S. crude futures for delivery in July advanced 3.3% to $34.35
a barrel, continuing a recent recovery. Prices have rebounded from
a collapse in March and April that sent front-month futures below
$0 for the first time ever on April 20. The negative pricing meant
holders of the futures had to pay buyers to take the contracts due
to a lack of available storage.
A global glut of crude has eased in recent weeks, supporting
prices. The recovery comes with drivers in much of the world
returning to roads and avoiding public transportation to stop the
spread of the coronavirus. More states and countries are expected
to relax lockdowns in the weeks ahead, fueling optimism about a
continued recovery in demand.
Hopes for the development of a vaccine are also boosting oil and
other investments like stocks. Novavax Inc. on Monday said it
started the first human study of its experimental vaccine. Other
companies such as Pfizer Inc. and Moderna Inc. have efforts in
human testing, prompting bets that successful development will
allow life to return to normal more quickly than expected.
Signs of a recovery in oil demand also come with supply
plunging. Companies around the world have responded to ultralow
prices by shutting in productive wells and curtailing output,
lifting crude prices.
"The oil market is finally coming to a balance soon" with supply
expected to match demand, Bjørnar Tonhaugen, head of oil markets at
consulting firm Rystad Energy, said in a note.
Brent crude futures, the global gauge of oil prices, advanced
1.8% to $36.17 a barrel Tuesday.
Adding to the optimism: Russian Energy Minister Alexander Novak
said during a recent videoconference that the energy ministry
expects higher demand to balance the market in the next few months.
Russia is part of a historic deal reached last month through which
many large producers are lowering supply.
Earlier in the year, a production feud between Russia and Saudi
Arabia raised global output as demand crashed, causing the
oil-price slide. U.S. crude started the year above $60.
Producers are now slashing supply, with Saudi Arabia pledging to
cut production to its lowest level since 2002 next month. Investors
are looking ahead to a June meeting of the Organization of the
Petroleum Exporting Countries and allies like Russia to gauge how
long supply cuts might last. If prices continue rising, analysts
expect producers to respond by gradually increasing output.
Elsewhere in commodities Tuesday, most-actively traded copper
futures for July delivery rose 1.3% to $2.4185 a pound. Hopes for a
quick economic rebound have also lifted the industrial metal
recently, as have data points showing a pickup in Chinese
manufacturing activity. China is the world's largest commodity
consumer, and growth there is returning to normal after an
early-year shutdown.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com
(END) Dow Jones Newswires
May 26, 2020 15:33 ET (19:33 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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