Oil climbs to $33.54 as market glut eases on lockdown relaxation

Brent crude, the international benchmark, rose 3.2 per cent to $33.54 a barrel in Asian trading Monday, as traders responded to signs demand was recovering with parts of Europe and North America beginning to ease some virus-related restrictions.

US oil climbed above $30 and Asia stocks made modest gains as investors took heart from easing coronavirus lockdowns, even as the head of the US Federal Reserve warned a full economic recovery could take until 2021.

West Texas Intermediate, the US crude benchmark, rose 4.3 per cent to $30.68 a barrel on Monday in Asia, climbing above $30 for the first time in two months.

A month ago, prices collapsed into negative territory for the first time as a lack of storage capacity forced producers to pay buyers to take product off their hands.

“Essentially the market is now telling us that storage is not an issue at the moment,” said Robert Rennie, head of global market strategy at Westpac.

But sentiment was tempered by comments from Fed chair Jay Powell, who on Sunday warned that a full US economic recovery may take until the end of 2021 and could depend on a coronavirus vaccine being available.

“[It] could stretch through the end of next year, we really don’t know,” Mr Powell said. But he added that while net job losses would probably persist for a “couple more months” months, the economy should recovery steadily in the second half of this year barring a renewed wave of coronavirus cases.

Gold prices climbed in the wake of Mr Powell’s warning, with the spot price up 1.1 per cent at $1,759.05 per ounce — a new seven-and-a-half year high.

Mr Rennie said that while oil was buoyed by relief over the outlook for storage, the lure of gold was burnished by the re-escalation in US-China trade tensions and expectations — reinforced over the weekend by Mr Powell — that rates would remain low for longer as the world’s central banks extended easing measures to shore up the global economy.

Japan’s benchmark Topix index rose 0.4 per cent in spite of data confirming the country slipped into recession in the first quarter, while Hong Kong’s Hang Seng index gained by the same amount.

China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks and South Korea’s Kospi each rose 0.7 per cent.

Futures markets pointed to gains for US stocks when trading begins on Wall Street later in the day, with the S&P 500 tipped to rise 1.1 per cent. London’s FTSE 100 was expected to gain 1.5 per cent.