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May 21, 2020, 3:24 p.m. EDT

Oil ends at six-week high on tighter supplies, demand prospects

So far this month, WTI has climbed 80%, while Brent oil has rallied by nearly 43%

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By Myra P. Saefong and Mark DeCambre, MarketWatch


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Oil futures ended higher on Thursday, adding to recent gains that have pushed both the international and the U.S. benchmark contracts to around 2 ½ month highs, as a slowdown in supplies and hope for higher demand help prices recover some of their recent losses.

Prices, however, finished off the day’s highs, pressured by profit-taking on the heels of oil’s sharp climb, as well as uncertainty over the rate of demand recovery as well as U.S.-China trade tensions.

“Uncertainty about the pace of sates opening up and confusion over the possibility of another stimulus bill is keep the macro player on edge,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.

Renewed U.S.-China trade tensions have also helped to limit gains for oil prices.

“China warned of countermeasures over the U.S. coronavirus sanction threat,” Edward Moya, senior market analyst at Oanda, said in a market update. That prompted “fears that a renewed tit-for-tat attack could derail the global economic recovery trade.”

Read: White House report blasts Chinese ‘malign activities’

‘For oil prices to remain supported, the world’s two largest economies need to get along.’

Edward Moya, Oanda

“For oil prices to remain supported, the world’s two largest economies need to get along,” said Moya.

July West Texas Intermediate oil /zigman2/quotes/211629951/delayed CL.1 +2.45% rose 43 cents, or 1.3%, to settle at $33.92 a barrel on the New York Mercantile Exchange—down from a session high of $34.66. The settlement was the highest since March 10, based on the front-month contracts, according to Dow Jones Market Data.

Meanwhile, global benchmark Brent crude for July delivery /zigman2/quotes/211756000/delayed UK:BRN.1 -0.16%   added 31 cents, or 0.9%, to settle at $36.06 a barrel on ICE Futures Europe—the highest since March 10.

So far this month, WTI prices, based on the front-month contracts, have climbed 80%, while Brent oil has rallied by nearly 43%.

Read: Harold Hamm, fracking pioneer, faces career reckoning as Continental Resources slashes output and rips up delivery contracts to survive the oil market crash

The Organization of the Petroleum Exporting Countries and their allies have cut oil exports by some 6 million barrels a day in May to date, Reuters reported , citing companies that track crude flows. An agreement between the group of producers, known as OPEC+, calls for cuts of 9.7 million barrels to the end of June, with Saudi Arabia among those who have pledged extra reductions.

Data from the Energy Information Administration on Wednesday was also supportive for prices, showing crude stocks at the storage hub in Cushing, Oklahoma, fell by about 5.5 million barrels for the week. The data also represented a second weekly decline in overall U.S. crude stockpiles, helping to ease concerns over tightening storage space that had contributed to a precipitous downturn in the price of the commodity.

Demand is coming back slowly as business lockdowns gradually end with the coronavirus pandemic receding, while OPEC+ production cut and lower shale output has reduced the excess in supply, Jasper Lawler, head of research at London Capital Group, wrote in a research note Thursday.

Adding further hope to a recovery from the deadly pandemic Thursday, data in Europe showed improvement. In the U.S., the number of jobless claims, on an adjusted basis, stood at 2.44 million last week, but has fallen for seven straight weeks.

Natural-gas futures, meanwhile, finished lower after the U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 81 billion cubic feet for the week ended May 15. That matched the average increase forecast by analysts polled by S&P Global Platts.

June natural gas  fell 6.1 cents, or 3.4%, to $1.71 per million British thermal units.

Among the petroleum products, June gasoline  edged up by 0.1% to $1.0451 a gallon and June heating oil  shed 0.2% to 98.90 cents a gallon.

/zigman2/quotes/211629951/delayed
US : U.S.: Nymex
$ 40.59
+0.97 +2.45%
Volume: 366,208
July 10, 2020 4:59p
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/zigman2/quotes/211756000/delayed
UK : U.K. ICE Futures Europe
$ 43.17
-0.07 -0.16%
Volume: 211,424
July 10, 2020 10:58p
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Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong. Mark DeCambre is MarketWatch's markets editor. He is based in New York. Follow him on Twitter @mdecambre.

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