US crude prices have reached their highest price since March, on strengthening fuel demand as countries around the world eased travel restrictions they had imposed to curb the spread of the coronavirus.

US crude gained 19.7 per cent last week and Brent crude rose 5.2 per cent after a week of bullish news. Both contracts gained for the third consecutive week.

West Texas Intermediate (WTI) oil settled up $US1.87, or 6.8 per cent at $US29.43 a barrel, just off the session peak of $US29.92, its highest since mid-March. WTI soared 9 per cent in the previous session.

Brent crude settled up $US1.37, or 4.4 per cent a barrel at $US32.50. Brent rose nearly 7 per cent on Thursday.

The second-month contract for US crude traded at a discount to the first month for the first time since late February, implying market tightness, said Bob Yawger, director of energy futures at Mizuho in New York.


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“It is no accident the spread switched after EIA crude oil storage, and storage at the NYMEX delivery site at Cushing, both posted up their first storage draws in weeks in Wednesday’s storage report,” he said.

The Organisation of the Petroleum Exporting Countries and other major producers have cut supplies to reduce a glut, and now there also are signs of improving demand. Data showed China’s daily crude oil use rebounded in April as refineries ramped up operations.

Still, the market remained cautious with the coronavirus pandemic far from over and new clusters of infection emerging in some countries where lockdowns have eased.

“Oil prices have been up significantly since yesterday thanks to a better assessment of the situation by the International Energy Agency (IEA),” Commerzbank said in a note.

The IEA expects global crude inventories to fall by about 5.5 million barrels per day (bpd) in the second half.

It also expects oil demand this year to fall by 8.6 million bpd, smaller by 690,000 bpd than the decline it forecast last month. It expects non-OPEC supply to fall by 3.2 million bpd.

Barclays raised its forecasts for Brent and WTI by $US5-$US6 a barrel for 2020 and by $US16 a barrel for 2021. It now sees Brent prices averaging $US37 a barrel and WTI at $US33 this year. For 2021, the bank expects Brent to average $US53 a barrel while WTI averages $US50.

“The sheer size and speed of the disruption and associated inventory overhang will take time to get fully absorbed, in our view,” Barclays analyst Amarpreet Singh said in a note.

On Wednesday, the US Energy Information Administration said the country’s crude inventories fell unexpectedly. This reduced the risk that prices will plummet ahead of the front-month contract expiring next week.

“With the drawdown, it shouldn’t be as perilous as it was last time,” said John Kilduff, a partner at Again Capital Management in New York. Ahead of last month’s contract expiration, fear of storage shortages pushed the contract into negative territory for the first time on record.

Still, market participants remain skittish about the upcoming expiration date, Kilduff said.

Record production cuts of nearly 10 million bpd by OPEC and associated producers – collectively known as OPEC+ – have kicked in for May and June, with Saudi Arabia, Kuwait, and the UAE pledging to cut beyond their commitments.

Oman said on Friday that it is considering cutting output further in June as well.