Oil prices drew some relief overnight after Saudi Arabia announced they would cut a further 1 million barrels per day in June, bringing their daily production to just under 7.5 million barrels per day.

This reduction in production provided excellent optics encouraging other OPEC+ members to comply and even offer additional voluntary cuts, which should quicken the global oil markets’ rebalancing act.

And at the same time, the move will significantly improve relationships with President Trump as this will help to aid the U.S. energy industry, which will no doubt be reciprocated at a later date. Still, these extreme measures also suggest global demand remains weak due to lockdowns to contain the coronavirus pandemic.

The VAT increase announced on Monday offers Saudi Arabia a significant amount of wiggle room as from the cash flow perspective, as the new tax offsets the reduction in revenue caused by the oil production cut.

However, this will provide the government with SAR cash rather than USD, which they can use to defend their peg.

Under the hood, however, oil prices continue to be driven by a combination of rising mobility pushing driving demand higher and views that North American shut-ins and turndowns will only increase in the coming months.

The real question, though, is “does mobility lead to re-occurrence” of COVID-19, and in doing so, change the slope of recovery?

It was an extremely whippy 24-hour session in oil prices and global market in general as there was a high level of nervousness over concerns about demand as countries slowly emerge from lockdown.

As well there remains a high degree of trepidation around building storage levels again and the risk of new outbreaks of the virus arising. China, South Korea and Germany, for instance, have all reported a deterioration in the statistics in recent days.

Unfortunately for global markets in general, this will continue to be a theme likely until effective vaccines are made available to the masses.

However, this week, inventory data could be vital to extending the recent rally.

The majority of traders’ top-line view is that inventories will increase at a slower pace but will still build, capping oil prices in the medium term. Also, that sentiment will remain sensitive to news flow about coronavirus, and any signs that major economies around the world are recovering more slowly than hoped.

Gasoline demand is rebounding, suggesting that the car — at least for now — is making a comeback. As lockdowns ease and parts of the world reopen for business, driving has emerged as the socially distant transportation mode of choice. It is offering a modicum of support to an oil market fresh off its worst crash in history and reeling from unprecedented demand devastation.

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