Oil rises after IEA report says there are signs of a recovery even as demand falls further

West Texas Intermediate crude gained 3.3% to $26.09 a barrel at 8:00 a.m. in New York. Brent crude rose nearly 3% to $30.03 a barrel at the same time.
Still, the IEA expects global demand to slump in May.
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Oil prices rose Thursday after a report from the International Energy Agency said there are signs of a recovery in the market even as demand drops this month.

West Texas Intermediate crude gained 3.3% to $26.09 a barrel at 8:00 a.m. in New York. International benchmark Brent crude rose nearly 3% to $30.03 a barrel at the same time.

In its monthly oil market report, the IEA said that its outlook has improved slightly from "Black April," when May WTI futures fell below $0 for the first time ever.

Still, the Paris-based group expects global oil supply to see a "spectacular" 12 million barrel-per-day fall this month to a nine-year low of 88 million barrels per day. The slump comes as OPEC slashes its output and other countries also reduce production to shore up the beleaguered market .

"It is on the supply side where market forces have demonstrated their power and shown that the pain of lower prices affects all producers," the IEA wrote in its Thursday report. "We are seeing massive cuts in output from countries outside the OPEC+ agreement and faster than expected."

This week, Saudi Arabia said it would cut production further . The state-led oil company, Aramco, trimmed shipments to some countries and reduced exports to others to adhere to the cuts, Bloomberg reported .

The IEA said that cuts from countries outside OPEC+, including the US and Canada, meant output was 3 million barrels per day lower in April than it was at the start of 2020. It could be 4 million barrels per day in June, according to the report, and continue to fall even further.

The IEA increased its forecast for global demand by 3.2 million barrels per day in the second quarter to 79.3 million. For the year, the group's demand forecast was increased by 700,000 barrels per day, but still is on track for an annual plunge of 8.6 million barrels per day.

"Oil production is reacting in a big way to market forces and economic activity is beginning a gradual-but-fragile recovery. However, major uncertainties remain," the IEA wrote in the report. A major risk is that there is a second wave of COVID-19 as economies reopen, which could further hinder demand if lockdowns need to be reinstated.

"The picture is still very bleak for the industry," IEA Executive Director Fatih Birol said in a tweet. "The heaviest demand destruction may be behind us, but huge uncertainties remain."

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