West Texas Intermediate for June delivery jumped more than 8% on Monday, one day ahead of the contract’s expiration, as production cuts and the easing of stay-at-home restrictions supported prices. The contract did close below its highest levels of the day, however, after earlier gaining more than 13%.
The futures contracts expire Tuesday and apparently production cuts and the return of the nation from being under house arrest over the COVID-19 pandemic helped boost prices. West Texas Intermediate crude rose $2.39 or 8.12% and finished the day at $31.82 a barrel. At one point in Monday’s trading, WTI, the U.S. benchmark traded as high as $33.32 per barrel.
On the ICE futures in Europe, Brent crude, already in the July contract settled 7.11% higher at $34.81 a barrel.
Oil is coming off its third straight week of gains, but prices are still well below January’s high, when WTI traded above $60 per barrel.
“Producers are significantly throttling back output and, with demand increasing, the market is on a slow path towards recovery,” said Rystad Energy’s senior oil markets analyst Paola Rodriguez Masiu. “Faced with meager demand and unattractive low prices, production curtailments came faster and deeper than initially anticipated.”
Since then, demand has begun to recover, and worldwide suppliers have reduced output in an effort to support the market. OPEC and its oil-producing allies took 9.7 million barrels per day offline beginning on May 1, and Saudi Arabia, Kuwait and UAE are among the group’s nations that have said they will voluntarily cut production further. Beginning in June OPEC de facto leader Saudi Arabia said it would take an additional 1 million bpd offline.