By Peter Nurse
Investing.com - Oil prices pushed higher Friday, helped by signs consumption is recovering just as the major producers cut back on output, eating into the massive glut that caused a dramatic drop in prices.
AT 9:25 AM ET (1325 GMT), U.S. crude futures traded 3.8% higher at $28.61 a barrel, while the international benchmark Brent contract rose 2.4% to $31.88. The U.S. benchmark is up around 16% over the week, while the Brent contract is up 6%.
Prices had risen earlier on Friday, in reaction to data showing China's industrial production rose 3.9% in April from a year ago, improving from a 1.1% fall in March. That's a tentative sign that the powerful industrial base of the world’s largest importer of oil is recovering from the coronavirus hit.
The upward move also follows on from the International Energy Agency boosting its demand forecast for 2020 by 700,000 barrels a day on Thursday, saying that the outlook for global oil markets has “improved somewhat.”
At the same time, major producers have scaled back production sharply in the wake of the historic decision of the Organization of Petroleum Exporting Countries and its allies, commonly known as OPEC+, to cut output by 9.7 million barrels a day for May and June.
Data from the Energy Information Administration this week showed U.S. crude production dropped for a sixth straight week to the lowest in nearly a year, suggesting that the demand/supply balance is moving nearer to equilibrium and thus reducing the chance of negative prices at the next futures contract expiry.
Senior banks now see upside in crude prices, with Barclays (LON:BARC) predicting Brent to average $51 a barrel and WTI $50 next year, while Bank of America Merrill Lynch (NYSE:BAC) looks for Brent at $45 and WTI at $42.
However, oil markets may not be out of the woods just yet.
U.S. retail sales slumped to their deepest monthly fall on record in April, falling by 16.4%, after a drop of 8.4% in March. That is considerably worse than the 12% fall expected by analysts and showed that U.S. consumers are still noticeable by their absence. Industrial production and manufacturing output were similarly weak.
Additionally, over 30 tankers laden with Saudi Arabian oil are set to arrive in the U.S. Gulf Coast and West Coast during May and June, according to ship tracking data compiled by Bloomberg.