Crude oil prices jumped to a two-month high on Monday, reflecting output cuts and investors' betting that looser lockdowns will boost demand for fuel.
West Texas Intermediate crude futures soared as much as 13%, to $33.32 per barrel. Brent crude, the international benchmark, climbed 10%, to $35.72 at intraday highs.
The combination of global production cuts and recovery expectations has been driving oil prices higher, Jeffrey Halley, Oanda's senior market analyst for Asia Pacific, said in a note on Friday.
OPEC and its allies reached a deal to cut oil production by 9.7 million barrels per day in May and June to shore up the price of the commodity. Prices tanked earlier this year as the coronavirus pandemic weighed on economic activity and Saudi Arabia and Russia waged a bitter oil-price war.
Citing an unnamed OPEC delegate, Energy Intelligence reported on Monday that OPEC might extend the cuts through the rest of the year.
Several countries that had enforced strict lockdown measures — including Italy, Iran, Spain, Israel, and Germany — have been easing them. However, the risk of a second wave of infections resulting in a fresh set of restrictions remains.
Several US states have also lifted some lockdown measures. As of Friday, Georgia, South Carolina, and Montana had lifted stay-at-home orders, while others including Texas, Maine, and Illinois had eased some restrictions.
The combination of supply cuts and greater hopes for a demand recovery has helped to boost oil prices. Halley said WTI and Brent outperformed on Monday because of "China stimulus measures, decreasing supply and peak virus hopes."
The WTI contract for May delivery turned negative for the first time in history on April 20 as the coronavirus pandemic tanked demand for fuel and worries mounted about a shortage of storage facilities, particularly at a key hub in Cushing, Oklahoma.
However, a repeat is unlikely when June contracts expire on Tuesday, as market forces are pushing prices higher, Halley said.
Analysts welcomed Monday's gains but questioned whether prices would remain stable in the long term.
"It is still unclear if the prices can continue their upward journey at the current pace, and especially if we have a valid reason for the crude price to top the $35," Aslam said.
Markets remain in a "tug-of-war pattern," where it remains unknown "whether the damage will be a lot worse than feared or the recovery will be much swifter," Neil Wilson, the chief market analyst at Markets.com, said in a morning note.