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Crude now faces uncertainty in demand after record rise

The oil had the highest monthly advance on record, just a few weeks after prices fell dramatically below zero.

The crude rose about 88% in May and on Friday US futures exceeded $ 35 per barrel for the first time since March, driven by drastic limits on supply from producers around the world. Still, prices are well below year-earlier levels, and demand, which was destroyed by the coronavirus crisis, may need to show sustained improvement for the recovery to spread.

For now, the outlook for consumption looks bleak, although it is on the mend. While coronavirus-related confinements are loosening, demand has not yet recovered in the US. Fuel sales, which were strongly affected in European nations such as Spain and Italy, will take time to recover. China is a bright spot, but the rest of Asia continues to struggle.

The number of drilling rigs in operation in the U.S. It decreased for the eleventh week, which has contained the excess oil that flooded the market. However, there is a risk that rising oil prices may tempt producers to further increase extraction.

“At the end of the day, what is driving it all is fuel demand,” said Tom O’Connor, senior director of oil markets at global consultancy ICF. “There will be an underlying depression in demand that will be there for some time.”

US crude oil futures fluctuated on Friday when Federal Reserve Chairman Jerome Powell defended aggressive action to protect the economy for the duration of the pandemic. Prices rose at the close and West Texas Intermediate crude closed 5.3% higher at $ 35.49 a barrel, after falling 4% during the session. Futures experienced the largest monthly increase on record among existing data since 1983.

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