A 3D printed oil pump jack is placed on dollar banknotes in this illustration picture, April 14, 2020. (Photo: Agencies)
Oil prices extended gains in Asian trade on Friday with signs that producers are already cutting output, recovering from unprecedented lows triggered by the coronavirus pandemic and further aided by rising tensions between the United States and Iran.
US benchmark West Texas Intermediate, or WTI, for June delivery was up 8.1 percent at $17.85 in Asian afternoon trading, after settling 20 percent higher on Thursday.
International benchmark Brent for June was changing hands at $22.55 a barrel, up 5.7 percent.
Oil prices have been hit hard as the pandemic strangles demand due to lockdowns and travel restrictions, with US crude falling into negative territory for the first time this past week as storage space runs low.
Earlier this month, the Organization of the Petroleum Exporting Countries and its partners, together known as OPEC+, agreed to cut output by almost 10 million barrels a day from May to shore up virus-hit markets.
The deal also brought an end to a battle for market share between Saudi Arabia and Russia.
There were also signs US output is beginning to fall. The Energy Information Administration said crude production fell slightly to 12.2 million barrels per day last week.
Tensions in the crude-rich Middle East also gave a boost to markets.
After US President Donald Trump ordered the US Navy to destroy any Iranian boats that harass US ships in the Persian Gulf, Iran's elite Islamic Revolutionary Guard Corps, or IRGC, warned on Thursday of a "decisive response".
The Guards plan to launch a new satellite into a higher orbit, the commander of IRGC's Aerospace Force was quoted as saying by Tasnim news agency on Friday.
Brigadier General Amir Ali Hajizadeh said that the launch was planned for the "not too distant" future, adding that the satellite will have greater efficiency.
On Wednesday, the IRGC said it had "successfully" launched the country's first military satellite into space.
Strategic waterway
The Gulf is a major gateway for oil to reach international markets, and spikes in US-Iran tensions typically drive prices higher.
Short of halting the world's oil production, there is little producers can do to help the price, said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
"One other option is to fuel geopolitical tensions in the Middle East to threaten supply and support prices. This is what Donald Trump is doing right now," she said.
Even though prices are stabilizing, they remain at multi-year lows and analysts say that demand needs to pick up again for them to truly recover.
AxiCorp global market strategist Stephen Innes said it was "probably rational to temper expectations as it's going to take more than a celestial alignment to get WTI to stick above $15 per barrel this month, let alone super tack to $20".