Big Gains For Crude As Confidence Over Economic Recovery Builds

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One of the worst months in oil trading history ended Thursday on an upbeat note, with traders extending their emerging optimism about an impending economic recovery and causing a massive 25 percent jump in crude prices.

Brent for June delivery rose $2.73, or 12 percent, to settle at $25.27 per barrel, while West Texas Intermediate for June rose $3.78, or 25 percent, to settle at $18.84.

Edward Moya, senior market analyst at OANDA, said, "Oil prices are looking very constructive because over the next month or two, supply will meet demand," and he added that oversupply worries are easing with a steady stream of headlines about crude production cuts in Norway, Russia, and the U.S.

Thursday also saw safeguards being taken in some parts of the world to prevent a repeat of the historic price plunge into negative territory that befell crude earlier in April: eight sources with knowledge of the matter told media that companies selling crude and condensate in Asia have added a new clause in contracts that prevents prices of their oil from falling below $0.

It is said that the clause looks most relevant for sales of condensate in Asia, as the ultra light oil is heavily discounted and performing worse than other crude in the physical market; cargoes will still be delivered with the minimum price being $0, but avoided will be the worst circumstance of buyers being paid to lift barrels.

Such safeguards are understandable, given the disclosure on Thursday that the energy sector is shrinking so dramatically that it's become the second-smallest group in the whole S&P index, now representing just 3 percent of the index compared to 15 percent a decade ago and 30 percent in 1980.

Still, there's considerable optimism building for a full economic recovery as more and more countries either end or ease their lockdowns; also, optimism over the apparent efficacy of the coronavirus treatment drug remdesivir caused Wall Street on Thursday to experience its biggest monthly surge in over 30 years. 

Also sure to influence trading over the coming days was the World Health Organization on Thursday announcing there are 102 potential COVID-19 vaccines in development and that eight of the contenders have been approved for clinical trials.

While effective treatment would end lockdowns and go a long way in returning the world economy to some semblance of normalcy, an effective vaccine would presumably end all need for social distancing and other precautionary measures.

Meanwhile, as if to reinforce the growing notion that common citizens' patience with draconian lockdown initiatives has just about run out, U.S. justice Samuel Alito this week ordered the Pennsylvania government to respond to arguments from a variety of Pennsylvanians asking the Supreme Court to halt enforcement of governor Tom Wolf's strict stay-at-home order.

This comes as dozens of protesters in Michigan, some of them armed, gathered Thursday inside that state's Capitol building to voice their opposition to governor Gretchen Whitmer's stay-at-home order.

For the record, COVID-19 has maintained a survivability rate of between 94 and 99 percent; to date the virus has caused 231,000 deaths globally, compared to 324,060 caused by malaria in the same time period, 354,278 by suicide, 555,385 by HIV/AIDS (which does not have a vaccine) and 2.7 million from cancer, according to Worldometer.