U.S. West Texas Intermediate crude was up 11 cents, or 0.4%, at $31.93 a barrel, giving up some of its earlier gains. It rose as high as $33.44 earlier in the session, hitting its highest since March 16.
Brent crude fell 19 cents, or 0.6%, to $34.62 a barrel by 0351 GMT, after earlier touching its highest since April 9.
The June WTI contract expires on Tuesday, but there was little sign of a repeat of the historic plunge below zero seen a month ago on the eve of the May contract’s expiry amid signs that demand for crude and derived fuels is recovering from its nadir.
“I would not be surprised to see a short-term pull back as strength that we’ve seen in crude market the last week was quite extraordinary,” said Michael McCarthy, chief market strategist at CMC Markets.
The market was boosted earlier by signs that output cuts agreed by the Organization of the Petroleum Exporting Countries (OPEC) and others including Russia, a group known as OPEC+, are being implemented on the ground.
OPEC+ has cut its oil exports sharply in the first half of May, companies that track shipments said, suggesting a strong start in complying with a new production cut agreement.
“Investors’ sentiment has improved as OPEC+ are apparently slashing output as they promised for this month, with more voluntary cuts expected in June,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
“At the same time, there is growing optimism that the easing of global (coronavirus) lockdowns will help boost economic activity and fuel demand,” he said.
In further support for prices, U.S. production is also falling, with crude output from seven major shale formations expected to fall by a record 197,000 barrels per day in June to 7.822 million barrels per day. That would be the lowest since August 2018, according to the U.S. Energy Information Administration.
Still, demand will recover only slowly as some restrictions remain in place and there is a significant risk of repeat outbreaks and lockdowns, Eurasia Group said in a report issued on Monday.
“Given a global recession, cautious consumers, and a later and potentially worse peak of the coronavirus outbreak in emerging markets such as Latin America, Africa, and South Asia, consumption will remain below 2019 levels of 100 million bpd for some time,” it said.