(Bloomberg) — Oil futures in London and New York are headed for their strongest close since early March, on optimism that fuel demand is recovering as lockdowns are lifted and major producers scale back output.Prices climbed for a third day as analysts at Bank of America raised their Brent crude forecasts, citing in part a faster demand recovery and the OPEC+ group’s commitment to curbing supply.Demand is improving in countries including Spain and India, while New Jersey Governor Phil Murphy said that Atlantic City casinos and indoor dining will reopen statewide on July 2. However, concerns about a potential second wave of the virus may limit further gains for oil.“You see demand picking up and you see supply being relatively constrained,” said John Kilduff, a partner at Again Capital. “If there is any prospect whatsoever of a faltering here in terms of reopenings and demand continuing to ramp back up, we are very vulnerable.”Still, the market is in much better shape than in April and May. Some of the world’s largest traders are seeing a rapid recovery in demand, and Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said last week that the OPEC+ alliance is on track to rebalance the market. In a reminder of the glut that needs to be cleared, the amount of crude stored at sea jumped last week, according to Vortexa. American stockpiles have also been rising.“We expect inventories to come down sharply over the next few months,” Bank of America Corp. analysts including Francisco Blanch wrote in a report. OPEC+ cuts and recovering consumption “will likely push the market into a growing deficit,” they said.See also: Asian Buyers Turn to U.S. Oil Amid Uncertain Flows From OPECMeanwhile, speculators are starting to put money back into products they had shunned during the rout. Money mangers last week had their biggest net-long position in Europe’s diesel benchmark since January, according to ICE Futures Europe data. In contrast, bullish bets declined for WTI and were steady for Brent.“Oil prices have already reached an interim stage of recovery,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy AS. Crude reaching $45 to $50 a barrel “would not be justified at this stage despite the supply curtailments as there are still valid concerns on the demand side.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
