Stronger consumption of oil globally pushed markets higher on Friday as countries move forward with opening back up despite concerns about the Coronavirus pandemic.
According to Bloomberg, futures in New York traded above $40 a barrel on Friday and are up about 11% this week, and Gasoline futures in the U.S. moved into backwardation for the first time in three months on Thursday, “a bullish signal indicating supplies are tightening as the summer driving season gets under way.”
But continued growth in the price of oil is dependent on containment of the Coronavirus pandemic, which could threaten to shutter economies anew if the virus spreads.
Apart from the virus, as Bloomberg notes, the other major threat to oil prices “comes from suppliers re-opening shuttered production too early. U.S. producer Continental Resources Inc. said Thursday it will start bringing back some of its idled oil output next month, but will keep about 50% curtailed.”
Meanwhile, Brent crude futures dropped 0.70%, to sell at $40.40 a barrel on Friday.
An OPEC+ panel met on Thursday and Iraq and Kazakistan “pledged to comply better with oil cuts,” sources told CNBC, which noted that “this means curbs by the Organization of Petroleum Exporting Countries and allies, known as OPEC+, could deepen in July.”
“There is enthusiasm in the market that oil supply is still under control,” said Paola Rodriguez Masiu, analyst at Rystad Energy. “A positive OPEC+ meeting does that and yesterday’s session helped renew confidence.”
