Oil up but caution reigns as WTI June contract expiry looms

Oil was up on Monday morning in Asia, continuing its gains from the previous session.

Brent oil futures gained 2.89% to $33.79 by 9:43 PM ET (2:43 AM GMT) and WTI futures jumped 4.03% to $30.71.

WTI futures jumped 5.9% and Brent futures were up 3.66% during the previous session.

Despite the black liquid’s gains, investors are cautious with the WTI June contract set to expire on Tuesday. Producers are preparing for a potential return to negative prices territory, which is what happened a month ago as the May contract expires.

“There’s clearly a different feel to the oil market heading into this contract expiry, with production cuts having been enforced globally, either through deals or unilaterally,” Craig Erlam, senior market analyst at OANDA, told Reuters.

“But will it be enough to avert another panic selling moment? The odds have certainly reduced … there’s a fine line between confidence and complacency and we can only hope that line hasn’t been crossed or early next week it could quickly unravel.”

Meanwhile, investors were cheered by Friday’s data from China showing a rebound in daily crude oil use. Demand rebounded in April as the country loosened lockdown and refineries were able to restart operations.

But some investors warned that it was too early to celebrate, with a second wave of the virus hitting some countries in the previous week and slowing the recovery of shattered demand further.

“The fundamentals in the market are clearly improving,” ING Research analysts said in a note.

“But we still believe that in the near term, the upside is limited given that we are still in a surplus environment … There is plenty of inventory for the market to digest.”

By Investing.com: https://www.investing.com/news/commodities-news/oilupbutcaution-reignsas-wti-june-contract-expiry-looms-2174963