Oil rallied for a fourth day as the pace of stockpile builds at the key U.S. storage hub slowed last week. Futures rose 3.1% in New York Monday, closing above $20, after Genscape reported a 1.8 million-barrel build in inventories in Cushing, Oklahoma, the delivery point for West Texas Intermediate crude. If the U.S. government reports a similar number Wednesday, it would mark the smallest increase at the hub since mid-March.
The discount on crude for June delivery relative to July, a structure is known as contango, tightened to its narrowest in about a month, indicating that concerns about oversupply may be easing. Last week, crude rallied 60% in three days on early signs of recovering demand and the start of output curbs from OPEC+ and other producers. “It gives a message to the overall market that everyone is leaning in,” Reid Morrison, global energy advisory leader for PwC, said in a phone interview.
However, the rebound will likely be a brief reprieve, according to Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA, as the market’s supply overhang eclipses the size of planned productions cuts.
“There is a lot of upward momentum in supply that needs to be reversed,” Tchilinguirian said.