Oil prices rose on Friday, extending gains on optimism about a recovery in fuel demand worldwide, despite a surge in coronavirus infections in some U.S. states and signs of a revival in U.S. crude production.
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U.S. West Texas Intermediate (WTI) crude futures gained 57 cents, or 1.5 per cent, to $39.29 at 0431 GMT but were on track for a slight drop for the week.
Brent crude futures rose 64 cents, or 1.6 per cent, to $41.69 and were also heading for a small decline for the week.
Overall, commodities markets were taking a positive view on the global recovery on Friday despite worries about coronavirus flare-ups, said Avtar Sandu, Senior Manager Commodities at Phillip Futures in Singapore.
“Optimism about recovering fuel demand worldwide has been supportive of prices despite an increase in total coronavirus infections worldwide and amid signs that U.S. crude production from shale would grow,’’ Sandu said.
Analysts said satellite data showing a strong pick-up in traffic in China, Europe and across the U.S. pointed to an improvement in fuel demand.
Congestion in Shanghai in the past few weeks was higher than in the same period last year, while in Moscow traffic was back to last year’s levels, data provided to Reuters by a location technology company, TomTom, showed.
However, there are fears a spike in COVID-19 infections in southern U.S. states could stall the demand recovery, especially as some of those states, such as Florida and Texas, are among the biggest gasoline consumers.
The global economic outlook has also worsened or at best stayed about the same in the past month, a majority of economists polled by Reuters said, and the recession underway is expected to be deeper than earlier predicted.
“It does appear the market is ignoring supply and demand fundamentals and moving on sentiment,’’ said Michael McCarthy, Chief Market Strategist at CMC Markets.
The prospect of increased U.S. crude production also kept a lid on gains on Friday.
A survey of executives in the top U.S. oil and gas producing region by the Dallas Federal Reserve Bank found more than half of executives, who cut production, expect to resume some output by the end of July.
WTI would have to be between $36 and $41 a barrel for a majority of producers to restore output, nearly a third said in the survey.
Another 27 per cent said prices would have to range between $41 and $45 per barrel.