By Peter Nurse
Investing.com - Oil markets pushed higher Tuesday, helped by signs of a recovery in demand after the coronavirus-inspired slump which could return the market into a more balanced circumstance.
At 9:15 AM ET (1315 GMT), U.S. crude futures traded 3.2% higher at $38.28 a barrel. The international benchmark Brent contract rose 2.8%, to $40.88.
Oil demand is recovering from its hefty fall, the International Energy Agency said on Tuesday, lifting its forecast for 2020 oil demand by nearly 500,000 barrels per day due to stronger than expected imports in Asia.
"China's strong exit from lockdown measures has seen demand in April almost back to year-ago levels. We have also seen a strong rebound in India in May, although demand is still well below year-ago levels."
That said, oil demand won’t fully recover until 2022 at the earliest, the IEA added, largely because of the “dire situation of the aviation sector.”
The jump in U.S. retail sales of 17.7% in May can only help the idea that demand will recover more quickly than expected in the world’s largest consumer of oil.
Turning to supply, the production cuts of around 10 million barrels a day adopted by the Organisation of Petroleum Exporting Countries and its allies, including Russia, will soon bring prices back to “normal,” according to the energy minister of the United Arab Emirates.
Prices could return to the usual levels within a year or two as curbs drain excess barrels from the market, Suhail Al Mazrouei said during the call hosted by the Atlantic Council, a Washington-based research institute.
The IEA sees the global crude oil supply and demand balance turning now into a deficit, with big implied stock draws throughout the final two quarters of this year.
"From June onwards crude stock will draw amid steep production cuts and a recovery in refinery runs," IEA said.
Attention will soon turn to OPEC’s monthly report on Wednesday, where the group will share its outlook and production estimates for May.
The OPEC+ Joint (NASDAQ:JYNT) Technical Committee and Joint Ministerial Monitoring Committee will be meeting on Wednesday and Thursday, respectively, to discuss the ongoing record production cuts and see whether countries have delivered their share of the reductions.