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Global oil prices soar due to supply cuts, hopes for demand rebound

London/New York, May 5 (efe-epa).- The price of a barrel of Brent crude, the international benchmark, jumped by 13.74 percent to $30.95 on Tuesday as plans in several countries to ease coronavirus-triggered lockdowns fueled optimism about an oil demand rebound.

Investors also were encouraged that production cuts will continue to exert upward pressure on prices.

Brent North Sea Crude ended the trading day on London’s Intercontinental Exchange with an increase of $3.74, up sharply from the previous day’s close of $27.21.

With the sharp rise on Tuesday, Brent crude for July delivery, the current front-month contract, closed above the psychological barrier of $30 a barrel for the first time since April 17.

Analysts are projecting that an easing of the lockdowns imposed across much of the globe to slow the spread of the pandemic will help increase demand for crude and balance out the excess supply in the market.

That same factor also has lessened concerns that storage space for excess crude production will run out, especially in the United States.

Separately, the price of West Texas Intermediate (WTI) crude, the US benchmark, skyrocketed by 20.45 percent to $24.56 a barrel due to optimism about a recovery in demand and the recent agreement between OPEC and its allies (OPEC+) to slash production – a pact that went into effect on May 1.

At the close of the trading day on the New York Mercantile Exchange, WTI for June delivery rose $4.17 from Monday, when West Texas crude climbed more than 3 percent to finish above $20 a barrel for the first time since mid-April.

WTI now has increased for five straight days, making a sharp comeback after falling into negative territory for the first time ever on April 20.

WTI for May delivery plunged by more than 100 percent that day to negative $37.63 a barrel, as demand for that oil contract (which expired on April 21) collapsed due to the global shutdowns and lack of storage space.

“The market is vulnerable, but now one thing is clear: the demand bottom is behind us and this is manifesting in oil prices which are on the rise,” Per Magnus Nysveen, chief analyst at energy consulting firm Rystad Energy, said in a research note on Tuesday.

US President Donald Trump also hailed the rise of oil prices on Tuesday. “Oil prices moving up nicely as demand begins again!” he tweeted.

The recovery in demand has been partly spurred by a historic April 12 agreement by OPEC and its allies to cut production by a whopping 9.7 million barrels a day in May and June and by a reduction in output by the US oil industry, which slashed production by around 900,000 bpd between mid-March and mid-April due to low demand and lack of storage space. EFE-EPA

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