Oil prices reversed gains and turned positive on Monday after Saudi Arabia’s energy minister said the kingdom aims to provide additional voluntary cuts in an effort to support global markets.
Brent crude futures gained 26 cents to trade at $31.23 per barrel, U.S. West Texas Intermediate crude futures gained 43 cents to trade at $25.18 per barrel.
Gains were capped, however, as concerns over a persistent glut and economic gloom caused by the coronavirus pandemic combined to cancel out support from supply cuts at some of the world’s top producers.
Both benchmarks have notched up gains over the past two weeks as countries have eased business and social lockdowns imposed to cope with the coronavirus and fuel demand has rebounded modestly. Oil production worldwide is also declining.
But possible signs of a second wave of coronavirus infections in northeast China and South Korea worried investors even as more countries started to pivot towards easing pandemic restrictions in moves that could support oil demand.
Goldman Sachs analysts said there was still concern that demand will stay weak in 2021, with worries about a second wave of Covid-19 cases and only a modest increase in personal or corporate travel.
Global oil demand has plummeted by about 30% as the coronavirus pandemic curtailed movement across the world, building up inventories globally.
Fears that the United States is running out of storage space triggered WTI prices crashing into negative territory last month, prompting some U.S. producers to slash output.
In a sign of that impact, the number of operating oil and gas rigs in the world’s largest oil producer fell to 74 in the week to May 8, a record low according to data released on Friday from energy services firm Baker Hughes going back to 1940.
“People are surprised by how quickly the U.S. is shutting in production and that’s exactly what we need in order to support prices,” said Tony Nunan, a senior risk manager at Mitsubishi Corp in Tokyo.
“There’s another 10 days before the June contract expires … if the WTI contract can avoid a crash going into expiry, hopefully we’ve seen the bottom.”