Oil prices were on track for a fifth straight day of gains on Tuesday as traders look toward a rebalancing of the market.
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West Texas Intermediate crude oil, which rose 11 percent to $25.24 per barrel, has now more than doubled in price since the streak began. Brent crude, the international benchmark, climbed 9.85 percent to $29.88.
“The worst of oil demand destruction is behind us and production cuts are behind us,” Phil Flynn, senior market analyst at the Price Futures Group, told FOX Business.
He was referring to the 30 million barrels of oil removed from the market each day as non-essential travel has come to a standstill due to stay-at-home orders intended to slow the spread of COVID-19 and the output-cut agreement reached by the world's largest producers that takes 20 million barrels of supply off the market each day.
President Trump took note of the recent spike in oil prices in a Tuesday morning tweet.
With U.S. states slowly reopening and Europe not far behind, oil demand is on the rebound, while production cuts from the world’s largest producers have “just begun” and oil majors have “slashed spending and output,” he added.
Traders on Tuesday will get an updated look into supply and demand in the U.S. when the American Petroleum Institute releases its weekly inventory data. Last week’s data, which showed a smaller-than-expected inventory build, was followed up a day later by the U.S. Energy Information Administration’s report that also showed stockpiles building more slowly than anticipated.
The inventory build at Cushing, Oklahoma, is slowing, reducing the chances the key U.S. oil hub will “run out of storage,” Flynn said. Last week, inventory rose 6.09 percent to 63.38 million barrels. The pace of the growth slowed for a third straight time, sliding from an increase of 15 percent four weeks ago to 12 percent and then 8.69 percent last week.
As states reopen and the production cuts kick in, there is the possibility that “we could actually see supply tighten significantly in the last quarter of the year,” Flynn said.