Oil Prices Rebound on Demand Signs and Supply Cuts

On May 6 oil prices jumped over 3% after hitting four-year lows, and Wednesday brought further gains. Markets moved as traders eyed weaker U.S. production and firmer global demand.

Oil lost 1.7% on May 5 after OPEC+ supply decision reignited oversupply fears. Brent crude then rose $1.92 to settle at $62.15 on May 6. WTI climbed $1.96 to close at $58.94. The rebound paused a five-day losing streak. Oil slid more than 20% since early April before Tuesday’s rally.

Early on May 7 Brent reached $62.59 and WTI rose to $59.53. Traders noted bargain hunting supported gains after prices hit four-year lows. Industry data showed U.S. crude stocks fell by 4.49 million barrels last week on API figures.

U.S.-China trade talks also held traders’ attention amid demand uncertainty. China’s buyers returned after the May Day holiday to scoop up discounted cargoes. European demand firmed as corporate forecasts shifted to a 0.4% Q1 earnings rise.

OPEC+ pressed ahead with a second consecutive month of accelerated supply increases. Officials raised June output by 411,000 barrels per day despite oversupply concerns. Saudi Arabia even lifted its official selling price for Asian customers.

Major U.S. producers such as Diamondback and Coterra announced rig count reductions. Analysts expect slower U.S. output growth later this year on that basis.

Commodity ETFs saw net outflows of $399 million on May 5. Trading volumes spiked as bargain hunters stepped in around the $60 mark.

Brent broke above its 20-hour moving average near $62.35. It now tests resistance at its 200-hour average near $62.93. WTI holds above its 20-hour average around $58.75 but meets resistance at $59.13. Tightening Bollinger Bands suggest a breakout may be imminent.

SEB’s Bjarne Schieldrop said buyers view $60 as a key psychological floor. ANZ’s Daniel Hynes warned lower prices and rig cuts could curb U.S. production.

Market participants now await U.S. inventory data later today. They also watch Federal Reserve policy moves for potential dollar and demand impacts. Traders will track OPEC compliance at the May 28 ministerial meeting.

Oil’s recent rebound highlights the tug of war between oversupply and tightening fundamentals. Higher demand signals from China and Europe may underpin prices if supply growth slows. However, further OPEC hikes could renew bearish pressure.

Geopolitical tensions in the Middle East continue to underpin a modest risk premium. Traders will remain wary of any supply disruptions that could spark sharp price spikes.

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