The markets are roaring higher this morning, with WTI crude trading above $40/bbl once again. Today’s hefty gains come, not from any concrete change, but rather from improving confidence in the reopening economy. If the $40/bbl trading levels hold, today will be the first time WTI crude has closed above $40/bbl since March 6.
Gasoline demand is helping, with the market moving into a backwardated structure which incentives producers to draw from inventory rather than accumulate more product. Summer gasoline season in the US typically lifts the entire petroleum market, and analysts are beginning to see a slow return to normal high seasonal demand. Summer demand typically trends in the 9-10 MMbpd range, but economic closures sent demand to just 5 MMbpd. Gasoline demand is now back to nearly 8 MMbpd in the US – still below average, but closer to normal levels.
Looking internationally, Iraq has confirmed it will comply with OPEC+ production quotas, after pumping more than 500 kbpd above their limit in May. The country claimed it would make up the difference in the coming months, producing below its limit to offset May’s overproduction. Assuming all producers comply with the deal, OPEC expects global inventories to fall back to five-year inventory levels either in late 2020 or in early 2021.
WTI is currently trading above $40/bbl for the first time in nearly two weeks. The commodity is currently pushing its gains higher, trading at $40.38, a gain of $1.54 (+4.0%) per barrel.
Fuel prices are also receiving a lift, though gasoline is lagging behind after showing larger gains earlier this week. Gasoline prices are currently $1.2788, a gain of 2.1 cents (1.7%). Diesel is trading at $1.2270, up 2.8 cents (2.4%) from Thursday’s closing price.