LONDON (Reuters) – Oil prices jumped on Thursday on news that China’s exports unexpectedly rose last month, and on the back of U.S. output cuts and the slow return of some activity in Europe.

Brent crude LCOc1 was up 6.26%, or $1.86, at $31.58 a barrel by 1121 GMT, after rising more than $2 at one point. In the previous session, the price had dropped 4%.

U.S. West Texas Intermediate futures CLc1 climbed 8.5%, or $2.04, to $26.03 a barrel, after dropping more than 2% in the previous session.

“Brent is trying to go back to early April levels, the market is testing the capacity of Brent to stay above $30 a barrel,” Olivier Jakob of consultancy Petromatrix said.

“We’re out of the super contango now. Refinery runs are coming back, the U.S. is cutting production so this is providing support.”

Tamas Varga, analyst at PVM Oil Associates, said that “rising U.S. gasoline demand, falling Saudi exports and the relatively stable stock markets” were also lending support.

U.S. gasoline stocks USOILG=ECI fell for a second week as some U.S. states eased lockdowns that had sharply hit traffic.[EIA/S]

Saudi Arabia sharply increased its official selling prices for June after cutting May exports to almost the lowest in a decade following a deal by global producers to reduce output to prop up prices.

However, a mismatch between demand and supply remained, despite a rebound from dire figures in the physical market.

U.S. crude inventories USOILC=ECI were up for a 15th straight week last week, rising by 4.6 million barrels, the Energy Information Administration said on Wednesday.

That was less than analysts had forecast in a Reuters poll, which suggested a 7.8 million-barrel rise, but the gain highlighted once again how much supply is being stored. Distillate inventories also rose sharply.

“A shift in market sentiment was lifting prices earlier this week, but the physical overhang does not want to go away just yet,” Citi Research said.

Also capping prices were indications that Iraq, OPEC’s largest producer after Saudi Arabia, has not yet informed customers of impending restrictions on its oil exports.

The Organization of the Petroleum Exporting Countries (OPEC) and allied producers – a grouping known as OPEC+ – agreed to cut production from May 1 by around 10 million bpd to help support prices.

China was a bright spot in terms of oil demand last month. Imports climbed to 10.42 million barrels day (bpd) in April from 9.68 million bpd in March, according to Reuters calculations based on customs data for the first four months of 2020.

Further, China’s overall exports data showed a rise, confounding expectations for a sharp drop, though a big decline in total imports suggested any recovery is some way off as economies around the world fall into recession, meaning demand for fuels will likely remain subdued at best.

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