Crude futures rallied Tuesday as more producers announced output cuts, while an easing of lockdowns was expected to bolster refined products demand.
NYMEX June crude settled at $24.56/b, up $4.17, while ICE July Brent settled at $30.97/b, up $3.77.
In refined products, NYMEX June ULSD settled at 89.60 cents/gal, up 9.29 cents, and June RBOB settled 7.98 cents higher at 90.13 cents/gal.
"Crude demand is starting to show signs of life as some US states begin to inch toward reopening," said OANDA analyst Edward Moya. "After the oil price elevator crash that took three months, demand devastation is fully priced in and the oversupply concerns are slowly easing."
In the US, producers Centennial Resource Development, Parsley Energy and Diamondback Energy separately said they were cutting output in response to the recent drop in oil prices. Likewise, Spain's Repsol and France's Total also announced spending and output cuts Tuesday.
That followed news last week that heavy hitters like ExxonMobil, ConocoPhillips and Chevron were each cutting roughly 300,000 b/d to 400,000 b/d.
With companies making voluntary cuts, the Texas Railroad Commission voted Tuesday against prorationing in the state. The Texas regulator was not expected to come out in favor of the proposal, after its lone elected supporter said Monday the measure was "dead."
"Over the past few weeks it has become increasingly obvious to me that we need to restore regulatory certainty to the oil and gas industry and move past the discussion on proration," said Chairman Wayne Christian Tuesday in a release. "This motion ensures Texas companies, rather than the government, can decide for themselves what level of production cuts make sense for them to make while they weather the storm of market instability."
According to S&P Global Platts Analytics, around 4.6 million b/d of cuts had been announced globally prior to Tuesday, with 1.34 million b/d coming out of the US, and 945,000 b/d coming out of Canada. Still, Platts Analytics estimates that approximately 13 million b/d needs to be shut in over the next two months.
Almost 10 million b/d is set to exit the market as the new OPEC+ cuts start to kick in.
"It is not clear at the moment whether the other non-OPEC producers will also follow suit," said CommerzBank analysts in a report. "For instance, the state-owned Brazilian oil corporation, which had raised the prospect of output being reduced by 200,000 barrels per day, has now reported record-high April exports of 1 million barrels per day."
Guyana "will not be signing up to the production cuts at all, and plans instead to increase its production from 75,000-80,000 barrels per day at present to up to 120,000 barrels per day in June," the analysts said.
On the demand front, a loosening of travel restrictions has started to bolster consumption of gasoline, although jet fuel consumption remains depressed by a lack of air travel.
Traffic in major US cities began to recover in mid-April and overall driving, a key indicator of gasoline demand, averaged about 85% of mid-January levels by April 24, according to Platts Analytics.
In Germany, Europe's biggest oil market, which began easing lockdown restrictions in mid-April, traffic congestion stood at 20% below 2019 levels at peak times Tuesday, according to Tom Tom's traffic index. By contrast, in the UK, which has yet to ease its lockdown rules, road congestion in London remained at half of year-ago levels early Tuesday.
Even in the UK, however, government data show road traffic in Europe's number two oil market has been creeping up since bottoming out in late March when the lockdown was announced.
"The market is still vulnerable but now one thing is clear, the demand bottom is behind us, and this is manifesting in oil prices, which are on the rise," consultants Rystad Energy said in a note Tuesday.
