Crude ETFs Build On Thursday's Gains Amid Waning Supply | ETF Trends

Crude oil is making big moves once again as oil prices rallied on Friday, extending Thursday’s gains, as data revealed demand for crude increasing in China after the relaxation of efforts to stem the coronavirus outbreak, including a gradual reopening of the economy, which is boosting hopes that the global supply may begin to diminish.

West Texas Intermediate gained $1.74, or 6.3%, to trade at $29.30 per barrel, having rocketed 9% Thursday. WTI is heading for a third weekly increase, up more than 12%. Meanwhile, Brent crude gained $1.14, or 3.66%, to trade at $32.27 per barrel.

The Invesco DB Oil Fund (DBO) is up 2.65% on the news or $0.15.

Amid supply decreases by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, there is increasing optimism of demand renewing, with numbers released on Friday illustrating that China’s daily crude oil use rebounded in April as refineries ramped up operations.

Despite the demand data, analysts are tempering expectations that all is well, as inventory still remains high amid limited storage.

“The fundamentals in the market are clearly improving,” ING Research analysts said in a note. “But we still believe that in the near term, the upside is limited given that we are still in a surplus environment … There is plenty of inventory for the market to digest.”

Evidence has now surfaced that oi stockpiles may be on the decline, however, as the International Energy Agency said it projects crude inventories to drop by about 5.5 million barrels per day (bpd) in the second half of this year.

In addition, U.S. crude inventories decreased for the first time in 15 weeks, the Energy Information Administration said on Wednesday.

Crude oil has climbed nearly 10% on the day Thursday, with the ProShares Ultra Bloomberg Crude Oil (UCO) rallying 7.89%. The move propelled energy stocks like Exxon Mobile, Chevron, and Conoco Phillips higher, aiding the stock market rebound despite the poor unemployment data.

U.S. fuel import prices also declined in April by the biggest monthly decline in over five years, as fuel import prices slumped by the most since records began in 1992, the U.S. Bureau of Labor Statistics said on Thursday.

Still, with oil prices having moved so quickly, analysts are worried that oil may struggle around technical levels, as oversupply remains an issue and the coronavirus pandemic drags on.

“WTI crude will struggle to break above the $30 level until both the economic outlook improves for the U.S. and some of the downside risks ease,” said Edward Moya, senior market analyst at OANDA.

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