(Bloomberg) -- Oil is on track to post its second weekly advance as output cuts from the biggest producers begin to rebalance a market awash with excess crude.
Futures in New York slipped 0.2% in Asia, after falling 1.8% on Thursday. Oil had surged after Saudi Aramco (SE:2222) raised prices on almost all grades for June, but later retreated into negative territory as supply glut concerns resurfaced.
Saudia Arabia began curbing production in late April as part of an OPEC+ pact, but still exported record amounts of crude last month. The level of excess global supply averaged 21.3 million barrels a day last month, according to Standard Chartered (OTC:SCBFF) Plc analysts.
U.S. futures are up almost 19% this week as OPEC+’s 9.7 million barrel a day cut, along with drastic reductions from U.S. shale prducers, eased concerns about dwindling storage capacity.
While the Saudi pricing brought brief relief to the market, a robust demand increase is what’s needed to sustain higher prices. There are signs that oil demand is recovering, and may even exceed supply by as early as the start of June, according to Goldman Sachs (NYSE:GS) Head of Commodities Research Jeff Currie.
Gasoline demand is also gaining steam in the U.S. with the premium for fuel over diesel at its highest since 2017. On top of that, weekly gasoline supplied, an indicator of consumption, rose by 804,000 barrels a day last week, the biggest bump since June 2018, according the U.S. Energy Information Administration.
Genscape Inc. reported on Thursday that stockpiles in Cushing, Oklahoma, fell more than 350,000 barrels since Friday, according to market participants. That would be the first contraction since late February if confirmed by official government data.
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