(Bloomberg) -- Oil extended gains in Asia to its highest levels since mid-March amid signs that demand is starting to recover and after promising early results for an experimental coronavirus vaccine sparked speculation economies could snap back quickly.
Futures in New York rose 3.4%, after gaining 8.1% on Monday. Chinese oil use is at 13 million barrels a day, just shy of the levels of a year earlier, traders and executives said. Demand in the U.S. is also expected to pick up as more lockdowns end. Virus hot spot New York will open a sixth region on Tuesday and urged major sports franchises to resume playing without fans.
West Texas Intermediate crude for June delivery settled on Monday at a premium to the July contract for the first time since January. The structure, known as backwardation, suggests that concerns about storage capacity at the key hub in Cushing, Oklahoma, are easing.
Major output cuts from the world’s top producers are also helping to rebalance the market. OPEC+ oil shipments have seen a “stunning reversal” in May, according to market intelligence company Kpler. Exports have fallen by 6.4 million barrels a day so far this month, it said, after the bloc agreed a deal to slash output. Meanwhile, oil production from the top seven shale regions in the U.S. is set to tumble to levels not seen since 2018.
The market also got a lift after Moderna (NASDAQ:MRNA) Inc. reported promising early results from an experimental vaccine. Still, the demand recovery is in its early stages and vulnerable to a resurgence of the virus before a vaccine becomes widely available.
©2020 Bloomberg L.P.