Oil Gains on Strong Demand Rebound Sentiment, OPEC Initiatives

China's demand is reportedly above pre-pandemic levels: File Image/Pixabay

Although India's troublesome Covid rates - which have caused crude traders to fret about global demand impact for the past few sessions - remain unchanged, sentiment on Tuesday swerved back to optimism for a robust demand recovery later this year, and as a result oil climbed by the most in nearly two weeks.

After sources such as BP, Russia, and the Organization of the Petroleum Exporting Countries (OPEC) on Tuesday expressed confidence in an economic recovery from government-mandated Covid lockdowns, gains in West Texas Intermediate outpaced those of its global counterpart, Brent.

Bernard Looney, chief executive officer at BP,  said China's oil demand is above pre-pandemic levels; also, OPEC this week decided to move forward with a planned gradual crude production increase, anticipating a strong demand rebound; additionally, Alexander Novak, deputy prime minister of Russia, said on Tuesday that there is optimism in the global oil market and global mobility is increasing.

Looney added, "America is almost back to where it was, the vaccines are going to kick in now in Europe; then of course the question is what happens in the rest of the world."

These upbeat sentiments were shared by Mohammad Abdulatif al-Fares, oil minister for Kuwait: on Tuesday he said global demand for oil "improved noticeably" as a result of vaccine rollouts and economic stimulus in major economies.

As if to fortify the recovery scenario, BP on Tuesday reported first quarter profits of $2.6 billion compared to analytical expectations of a $1.4 billion profit; the oil giant says it intends to resume share buybacks at a cost of around $500 million in the second quarter.

Edward Moya, senior market analyst at Oanda Corp., remarked that OPEC's decision "Shows that the energy market is in pretty good shape right now, but if new risks emerge, we'll see how sensitive the market is."