Oil rallied for a fifth consecutive day on the back of implementation of production cuts by Opec and its allies and easing of coronavirus-related restrictions by some countries in Europe and Asia.
Brent, the global benchmark for two-thirds of the world's oil, jumped 12 per cent to trade at $30.48 per barrel at 5:42pm UAE time on Tuesday, whereas US crude gauge West Texas Intermediate rose 18 per cent to $24.08 per barrel.
“Oil demand should pick up as travel restrictions ease starting in May, while supply should be curbed by Opec and non-Opec production cuts in the second half,” said Giovanni Staunovo, commodity analyst at Swiss bank UBS.
“We therefore expect the oil market to be balanced in the third quarter and undersupplied in the fourth quarter and Brent to recover to $43 per barrel by end-2020 and to $55 per barrel by mid-2021.”
Saxo Bank last week also predicted Brent would trade between $50 to $70 per barrel by the first and second quarters of 2021 on higher demand.
A number of countries across the globe including Spain, Italy, India, Turkey, Nigeria, New Zealand and Malaysia began easing coronavirus-related restrictions to allow some businesses to operate under strict guidelines, such as reducing office capacity to 30 per cent and making facemasks and gloves compulsory.
India, which is the third-biggest consumer of oil in the world after the US and China, also gave permission earlier this week for some businesses as well as taxis and buses to operate in areas with few or no infections. The country is also repatriating thousands of expatriates stranded in different countries by operating special flights and naval ships.
“All of this optimism has helped the oil prices to record the longest run of daily gains in more than nine months,” said Naeem Aslam, chief market analyst for London-based Avatrade. “This further strengthens the argument that the worst may be over for oil, and given the fact that the oil producers have started to curtail voluntary and involuntary supply cuts, the supply and demand curve may reverse its course.”
Opec and its allies including Russia are slashing output by 9.7 million barrels per day from May 1 in a bid to reduce oversupply in the market.
Although WTI prices are now back above $24 per barrel, "rising tensions between the US and China, added to an already shattered global demand, will certainly limit the upside potential" of oil, according to Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
WTI slipped into negative territory for the first time last month for contracts due to be delivered in May as storage capacity dwindled on the back of weak demand and excess supply. It plunged as low as -$40 per barrel on April 20, the day before expiry. Brent prices proved to be more resilient, as cargoes are mainly sea-laden and serve a global customer base so do not face the same storage limitations as US producers.