Commodity markets and risk assets, in general, have performed well overnight as economies emerge from lockdown and as vaccine hopes spring eternal.

There is always chance something good might happen on the medical front with the full weight of the biotechnology industry behind these efforts.

The oil price continued to find support from a combination of positive macro data points and increased refined product demand in China and India so far in May.

Improved Chinese industrial activity and pent-up need for gasoline as traffic congestion rise in major cities across east Asia and have seen Chinese oil consumption return just shy of last year’s levels suggesting a more optimistic view on oil demand may be justified.

Also, lockdowns continue to ease. California’s governor reported that three-quarters of the economy is open. European economies have had no reason to reverse lockdown easing so far.

Oil demand is recovering in a more V-shaped fashion than macroeconomic data, and with distillate joining the recovery party, it is a massive boost. The recovery in the distillate market is providing a fantastic springboard for oil prices.

Hopefully, this will soon be complemented by an easing in global travel restrictions, which should eventually see a pickup in the depressed aviation fuel sector.

Apple Maps driving behaviour shows US driving is nearly back to pre-Covid-19 levels and shows a positive divergence over public transport use globally.

Together with the surge in China’s first-time car buyer sales, this indicates a definitive trend emerging as consumers prefer the segregated mobility of an automobile to maintain social distance.

A developmental vaccine from a US biotechnology company is showing positive results offering provisional support to risk assets. Indeed, if there is an available vaccine that can be mass-produced, it will be the watershed moment, and the ultimate Covid 19 slayer as reopening and resurgence concerns will then fall by the wayside.

A bullish start to the week has pushed crude above $30 per barrel. This seems partly linked to relief that WTI expiry appears likely to be orderly as open interest has pared significantly.

As well, traders were rehashing EIA/OPEC/IEA reports, which, on the margin, projected faster falls in non-OPEC production, and, importantly, the IEA now forecasts aggregate storage will not brim.

And with definite signs that the curve is flattering, ignoring the technical nature of the June vs. July backwardation, the market agrees.

The drop in inventory levels has been more the result of a fundamental rebalancing than disruptive front-end pricing, which is a hugely bullish signal. The simultaneous declines in both the national and Cushing inventory, suggesting there is no diverting of crude from Cushing into other storage facilities. The drop in inventory levels has been more the result of a fundamental rebalancing than disruptive front-end pricing, which is a hugely bullish signal.

Yet unknown is how much of the non-OPEC reduction will remain in effect if oil prices continue to move higher and if compliance within the OPEC+ group endures.

Still, both supply and demand are moving in the right direction.

Oil markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp