Oil up on the back of increasing demand after loosened lockdowns
LONDON, May 5, 2020 – Oil was up on Tuesday morning in Asia, building on its gains from the previous session.
Brent oil futures rose 1.40% to $28.23 by 9:43 PM ET (2:43 AM GMT) and WTI futures jumped 6.38% to $21.69.
Demand for the black liquid continues to rise cautiously. This comes as some countries kickstart economic activity after emerging from weeks-long lockdowns to curb the spread of the COVID-19 virus.
The production cuts agreed to by OPEC+ members in early April, in addition to cuts from some US producers, have played their part in reducing output, with second quarter productions levels expected to see a 17-year low.
“The bigger picture, while not great, is looking more constructive as countries around the world are reopening and that’s going to increase oil demand at the same time. OPEC-plus is cutting production and production is falling elsewhere around the world due to economics,” Andy Lipow of Lipow Oil Associates told CNBC.
But as worldwide fuel demand fell by an estimated 30% in April due to the lockdowns, crude oil can expect to face weaker demand for several more months.
Investors will also continue to keep a close eye on the increased US-China tensions as the two counties dispute the origins of the COVID-19 virus.
“Demand growth in China is good for the energy market right now, it is pretty much the only game in town. Even a verbal scrap with President Trump is not good for China demand growth, considering the fragile circumstances the market is currently operating under,” Bob Yawger, director of energy futures at Mizuho, told CNBC.