Oil prices climbed above $30 for the first time in more than a month Monday as production cuts by the world’s largest producers and a slow return of demand continue to provide support.
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West Texas Intermediate crude oil, the U.S. benchmark, gained 8.12 percent to $31.82 per barrel and closed above $30 for the first time since April 8. Brent crude, the international standard, was higher by 7.11 percent at $34.81 a barrel.
WTI futures for June delivery expire Tuesday with prices having seen a sharp reversal from last month’s memorable drop below zero.
“Oil prices are on the rise as global economies open and oil producers are continuing to pull back,” Phil Flynn, senior market analyst at the Price Futures Group, told FOX Business. “Jerome Powell’s concern about the economy means he will keep his foot on the accelerator of economic stimulus which should help energy demand rebound.”
President Trump took note of the surge oil prices in a tweet on Monday.
U.S. rigs in operation have fallen to record lows for two consecutive weeks and inventory data released Wednesday by the Energy Information Administration showed production cuts are working. U.S. stockpiles for the week ended May 8 fell by 745,000 barrels, marking the first decline in 16 weeks.
Kuwait and Saudi Arabia agreed Sunday to shut down production at the joint Al-Khafji oil field for one month beginning June 1, according to Kuwaiti newspaper Al Rai.
Saudi Arabia last week said the kingdom would reduce oil production by 1 million barrels per day, lowering its daily output to about 7.5 million barrels. The output cut was in addition to the historic deal reached last month by the world’s largest producers that reduced global output by about 20 million barrels per day beginning May 1.
Falling global production comes as countries all over the world are beginning to loosen stay-at-home orders designed to slow the spread of COVID-19.
But Federal Reserve Chairman Jerome Powell said on CBS’ “60 Minutes” that the U.S. economy may not fully recover until a successful COVID-19 vaccine is developed – which may not happen until 2021. The Fed chairman vowed to continue to support the economy.
“There's a lot more we can do to support the economy, and we're committed to doing everything we can as long as we need to,” he said.