Amid supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, bright spots are also emerging on the demand side. Data released on Friday showed China’s daily crude oil use rebounded in April as refineries ramped up operations. Still the market mood remains far from euphoric, with the coronavirus pandemic far from over and new clusters emerging in some countries where lockdowns have been eased. “The fundamentals in the market are clearly improving,” ING Research analysts said in a note. “But we still believe that in the near term, the upside is limited given that we are still in a surplus environment … There is plenty of inventory for the market to digest.” There is optimism that stockpiles may be on the wane. The International Energy Agency said it expects crude inventories to fall by about 5.5 million barrels per day (bpd) in the second half of this year.

Meanwhile U.S. crude inventories fell for the first time in 15 weeks, the Energy Information Administration said on Wednesday. Output cuts will boost the trend towards lower inventories, but U.S. crude is unlikely to see strong gains. “WTI crude will struggle to break above the $30 level until both the economic outlook improves for the U.S. and some of the downside risks ease,” said Edward Moya, senior market analyst at OANDA.

On the production side, OPEC and associated producers — collectively known as OPEC+ — had already agreed to cut output by a record of nearly 10 million bpd before Saudi Arabia this week extended its planned reductions for June, pledging to lower supply by nearly 5 million bpd. Saudi Aramco, the world’s largest oil exporter, reduced the volume of crude it will supply to at least three buyers in Asia by as much as 30% for June, three sources with knowledge of the matter told Reuters on Thursday. OPEC+ now wants to extend overall production cuts beyond May and June when the group next meets, sources told Reuters earlier this week.