Oil prices soared higher on Tuesday on hopes for a recovery in vehicle traffic and fuel demand as some European and Asian countries along with several US states began to ease coronavirus lockdown measures.
International benchmark Brent crude rose US$2.77, or 10.2%, to US$29.97 a barrel by 1530 GMT.
US West Texas Intermediate (WTI) crude futures traded US$3.47, or 17%, higher at US$23.86 a barrel.
Brent has closed higher the previous five sessions, while WTI has closed higher for the last four.
Italy, Spain, Nigeria and India, as well as some US states including Ohio, began allowing some people to go back to work and opened up construction sites, parks and libraries.
US President Donald Trump praised the rise in oil prices and hailed measures by the states to reopen their economies.
Vehicle traffic in most of the United States, including those yet to lift shelter-in-place orders, has also rebounded, RBC Capital Markets research said in a note.
“We’ll see a pop in gasoline demand because people are stir crazy and want to get outside the house, even if it’s just a drive to nowhere,” said John Kilduff, partner at hedge fund Again Capital LLC in New York.
“Also with workplaces reopening, there’s going to be cars on the road.”
Swiss bank UBS said the easing of restrictions would help lead to a balance in supply and demand for the oil market in the third quarter and even projected an undersupply by the fourth, forecasting an end-2020 recovery of Brent to US$43 per barrel and US$55 by mid-2021.
Morgan Stanley said the peak of oversupply in global markets had likely been reached and a storage crunch was abating.
“Inventories have built but not quite as strongly as feared: With social distancing measures ramped up in March … the observed inventory increases have not been quite as strong as feared,” it said in a note.
However, Vitol Chief Executive Russell Hardy told Reuters long-term peak demand may be permanently eroded. Global oil demand sank by 26-27 million barrels per day (bpd) in April and Hardy predicts a year-on-year drop of over 8 million bpd.
Further, air traffic is not expected to rebound anytime soon, which will slow the recovery for fuel demand.
U.S. crude oil stockpiles were seen rising for a 15th consecutive week, while inventories of oil products also likely built last week, a preliminary Reuters poll showed.
Industry data is due to be released later on Tuesday.