Oil wavered Thursday after breaking out of a month-long range with countries like the U.S. highlighting the demand recovery starting to take shape.

Futures in New York edged higher alongside a broader market rally, following a nearly 5 per cent jump in prices in the previous session. U.S. jobless claims fell to a new pandemic-era low, while retail sales in the country accelerated by the most in 10 months -- providing the latest signs of the economic comeback gaining pace there.

Still, even after U.S. crude stockpiles fell to the lowest since February, portions of West Texas Intermediate’s forward curve continue to point toward near-term weakness. The nearest contract traded at a discount of as much as 11 cents to the following month in a bearish pattern known as contango, which points toward oversupply.

“There was a nice cocktail of bullish data this week, justifying a break out of the top of the range,” said Bob Yawger, head of the futures division at Mizuho Securities. “But there’s still plenty of crude oil around,” which limits prices gains.

Oil remains firmly above its most recent trading range, where it had been stuck near US$60 a barrel since mid-March as some regions faced a resurgence in virus cases. Continued signs of a stronger U.S. market are alos pushing prices higher. In the last week, the number of miles driven on the country’s interstates rose versus the same period in 2019 for the first time since the pandemic began.

The market is “cutting down on the froth from this week’s enthusiasm,” said, Bjornar Tonhaugen, head of oil markets at consultant Rystad Energy. “The recovery in demand is coming and oil price increases with it – the road is just a bit winding on the way there.”

Prices

  • West Texas Intermediate gained 24 cents to US$63.39 at 10:44 a.m. in New York
  • Brent for June settlement rose 29 cents to US$66.97 a barrel

Crude’s sharp rally has been accompanied by gains in the market’s structure that continued into Thursday. The much-watched spread between the nearest two December contracts is on track for its strongest close since late March. That’s a sign that traders are growing more bullish on the market.

There are reasons to be cautious, however. The pandemic is raging in India, while OPEC and its allies are about to start adding more supplies. Another wild-card is Iran, which is seeking to revive a 2015 nuclear deal and have U.S. sanctions removed to lift crude exports, but progress remains uncertain. The demand picture in Europe is also wobbly, with toll road traffic in France last week the weakest since May.

Other oil-market news:

  • Saudi Arabia’s oil facilities were targeted with drones and missiles for the second time in a week, with Yemen’s Houthi rebels claiming an attack on the south-western refinery town of Jazan.
  • Royal Dutch Shell Plc’s planned spending on oil and gas production won’t maintain current output levels as it refocuses toward lower-carbon energy.