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Oil set for third weekly gain as market rebalances

New York

OIL is heading for a third weekly gain on signs the market is slowly rebalancing as major producers cut supply and consumption recovers after a historic collapse in demand due to the coronavirus.

Futures in New York are up 13 per cent this week after closing above US$27 a barrel on Thursday for the first time in over a month. China's industrial output increased in April for the first time since the outbreak, signalling economic recovery aided by government stimulus efforts.

Meanwhile, Saudi Arabia has slashed supply to its customers in the US, Europe and Asia as Opec and its allies reduce production by almost 10 million barrels a day.

Oil is still down more than 50 per cent this year after a rout that pushed prices below zero and the road back to pre-virus levels of demand looks long and uncertain.

Opec this week presented a bleak assessment of crude markets for the second quarter and the US Federal Reserve warned of a lasting downturn, but efforts to rebalance the market appear to be working.

The outlook for global oil markets has "improved somewhat," according to the International Energy Agency (IEA), while Goldman Sachs Group Inc. and BP Plc see gasoline use rising. Opec+ has cut daily exports by almost 6 million barrels during the first 14 days of this month, according to Petro-Logistics.

Industrial output in China rose 3.9 per cent from a year earlier, reversing a drop of 1.1 per cent in March, data showed on Friday.

Global oil production is on track for a historic decline this month to the lowest level in nine years, according to a monthly report from the IEA on Thursday.

The agency boosted its 2020 demand estimate by 700,000 barrels a day, but it still remains set for an annual plunge of 8.6 million a day, or about 9 per cent. BLOOMBERG

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