A Liberia-registered tanker moored in the port of Klaipeda, Lithuania, June 6.
Photo: valda kalnina/EPA/ShutterstockOil prices climbed Friday, sending U.S. crude back near $40 a barrel with traders hopeful that global fuel demand will rebound more quickly than anticipated.
U.S. crude futures for delivery in July rose 2.3% to $39.75 a barrel, recording for their highest close since early March. Prices started the year above $60, briefly collapsed below $0 for the first time ever in late April due to a global glut of oil and are now rebounding with drivers returning to the road and producers curtailing supply.
Prices rallied Thursday after the Organization of the Petroleum Exporting Countries reported high compliance with the cartel’s production cuts in May and reiterated that those not fully complying will have to compensate by cutting output more moving forward.
Output reductions from OPEC allies like Russia and tumbling U.S. shale production have also buoyed crude prices.
The supply cuts are coinciding with a rebound in fuel consumption as the world economy reopens for business. Data show an uptick in Chinese economic activity recently, and drivers around the globe will likely continue avoiding mass-transit systems due to coronavirus concerns, another factor that could lift oil demand.
At the same time, governments and central banks around the world are spending to support growth and slashing borrowing costs.
“The comeback in demand is a testament to the impact of global economic stimulus and its effectiveness in healing the global economy,” Phil Flynn, a senior market analyst at Price Futures in Chicago, said in a note.
Brent crude futures for August delivery, the global gauge of oil prices, rose 1.6% to $42.19 a barrel Friday on the Intercontinental Exchange.
Oil’s Friday climb came with global stocks also rising. Reports that China plans to increase its purchases of U.S. agricultural products to comply with a trade deal the two countries reached earlier in the year was boosting investor sentiment.
China is the world’s largest commodity consumer, and trade tensions between the U.S. and China had caused oil-price volatility in recent years.
U.S. stocks fell and oil pared some of its gains after tech giant Apple Inc. said it will close some stores in states—including Florida, Arizona and North Carolina—that are seeing a continued rise in coronavirus cases. Many analysts remain worried that a new spike in cases could slow the economic recovery.
With crude now climbing back to levels that would make more drilling projects profitable, traders are closely watching to see how quickly companies increase supply. Some shale producers have already pledged to increase output in the coming months. Still, investors think it will take time for that production to return to the market and expect the ultralow prices from earlier in the year to hamper energy supply chains for years to come.
Elsewhere in commodities Friday, most actively traded copper futures rose 0.9% to $2.611 a pound, also extending a recent recovery on an improving outlook for demand. The industrial metal is sensitive to momentum in the global manufacturing sector and growth in China, which accounts for roughly half of the world’s copper consumption.
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Write to Amrith Ramkumar at amrith.ramkumar@wsj.com
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June 20, 2020 at 02:12AM
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