Oil prices are rising as producers cut output and investors bet the American consumer will help drive the industry out of its demand crisis as the U.S. economy reopens.

West Texas Intermediate oil futures for June rose 20.5% Tuesday, in a fifth-straight day of gains for the first time since July. WTI was up $4.17 at $24,56 per barrel.

Oil has gotten a boost from production cuts that analysts say could help bring the market back into balance. OPEC plus producers, including Russia, agreed to trim 9.7 million barrels a day from their oil output, and that agreement went into effect Friday. Other producers, like Norway, also agreed to cut back.

In the U.S., where the industry is driven by economics, oil production is down at least 1 million barrels a day from its mid-March high of 13.1 million barrels a day. Analysts expect it could be down another 1 million barrels or more this month alone after the recent price collapse that took WTI futures to negative levels.

But it’s the optimism that these combined cuts will be met with better demand that’s helping push oil higher in the latest leg of the rally. Investors are looking at the reopening of the economy in the U.S., Europe and elsewhere as signals that drivers will have to fuel up.

Michael Bradley, managing director at Tudor Pickering Holt, said markets have reacted to the idea that production is getting cut faster than expected and demand is rising sooner.

Oil’s price direction will be determined by what happens with the virus and new cases as the states reopen for business over the next several weeks. “It will break one way of the other,”  said Bradley. “If they stabilize, I think you’re going to move crude even higher … I think we’re going to be range bound in the next couple of weeks,”

Investors are trying to make sense of demand signals in consumption surveys, tanker unloadings, mobility studies and government demand data.

“There’s a lot of pent-up demand. People are heading out as soon as they can, even if they’re taking a drive to nowhere,” said John Kilduff of Again Capital.

The American driver is pivotal to world oil demand, and in normal times, gasoline  consumption in the U.S. accounts for nearly 10% of daily global energy demand. After the state shutdowns, demand for gasoline dropped nearly  by half.

The Energy Information Administration reported an improvement in demand to about 5.9 million barrels a day, which is still 37% off its five-year average for this time of year. The four-week average in demand had been lower, at 5.1 million barrels a day in the period between March 23 and April 24.

The government releases its latest weekly data Wednesday at 10:30 a.m. ET.

Tom Kloza, head of energy analysis at OPIS, said his latest survey 15,000 gasoline retailers shows demand appears to have risen by 6 percentage points in the past week, and it is now down about 40% from normal levels. At its peak, demand was down about 50%.

“I’m skeptical,” said Kloza. “It’s a spectacular recovery in price, but I think it’s a modest recovery in actual demand numbers.”

Refiners have cut back dramatically, and gasoline prices have dropped sharply. Retail prices are averaging $1.78 per gallon of unleaded, down from $2.89 per gallon at the pump this time last year, according to AAA. In the futures market Wednesday, RBOB gasoline futures were up nearly 10% in late trading, at 90 cents per gallon.

“This market is behaving as if we’re going back to 9 million barrels a day plus of demand,” Kloza said. ‘”The question is what’s the highest we see, and when will we see it. This is a false start.”

Matt Smith, director of commodity research at ClipperData, said one thing that is exciting the market is the fact that tankers that have been sitting off the West Coast are now unloading crude set for California refineries.

Last week, the tankers unloaded 1.3 million barrels a day, the second-highest amount in any week this year,  said Smith. 

“We’ve seen them coming on shore which signals to us these refineries are going to start back up as California opens up,” Smith said. California is scheduled to open some businesses Friday, in a phased reopening.

“It’s just one more signal that demand is starting to pick up. … Obviously, you have Texas opening up again. Anecdotally, you’re hearing how Houston is starting to return to normal in terms of traffic,” said Smith. “These signs are pointing to not only is the bottom in here but to higher demand again.”

Even so, Smith said the market is too optimistic. “It seems to be getting ahead of itself,” he said. The California unloadings, however, are a positive. “This is a clear sign that demand is set to pick up in coming weeks.”

RBC analysts have been tracking vehicle traffic patterns in major cities around the world on an hour-by-hour basis, and they find that U.S. vehicle congestion has definitely increased. “Our real-time gasoline-weighted US vehicle congestion index indicates that traffic has definitively bounced from the lows after bottoming near 83% below normal in Mid-April to current levels of 74%,” they wrote in a note.

The analysts said that translates to an increase in demand of 795,000 barrels a day. In New York City, for example, traffic congestion hit a low of 96% below normal in the middle of March but now is about 88% below normal, they noted.

In the same time frame, Houston traffic congestion went from 84% below normal to 70% below. In Atlanta, traffic congestion  is about 67% of normal, improved from 82%.

Bradley said he believes the market is sending positive signs and he turned neutral on crude last week, from negative.

“This is about going back to work slowly, so what that has done is now we’re going to gasoline stations. We’re taking gasoline out of gasoline stations. The next thing is taking gasoline and these other things out of storage. The last thing is getting refineries running again.”

Refineries processed 12.8 million barrels of crude oil last week, down 16.4 million barrels a day from last year. At its low, runs were down about 4 million barrels a day from the year ago.

Bradley said demand globally fell to about 75 million barrels day, and may pick up by about 10 million barrels a day quickly in the month of May and be back up to demand of 88 to 90 million barrels a day by June.

“Demand trumps everything. Demand is the thing that took us to negative $36 per barrel, and demand is the thing that’s going to take us up to $35.”

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