Oil prices may have stabilized after plunging in response to the coronavirus and the price has surged more than 80% this month as demand returned following the easing of lockdown restrictions in some countries. Demand and supply fundamentals are getting better which is helping the oil market to recover from the coronavirus plunge. Another factor involved in the oil price recovery after OPEC+ countries cut crude production by nearly 10 million BPD starting in May.
Last week the US oil prices climbed to the highest level since March 11th after the EIA data showed the US crude inventories dropped by 4.9 million barrels in the latest week, the biggest drop so far this year. Meantime, China’s total crude oil imports in April amounted to 9.84 million BPD, up from 9.68 million BPD in March. China’s imports of Russian oil have risen 18 per cent in April year-on-year, according to Reuters. This month, for the first time since November, Chinese refiners will also receive their first crude cargo from the US.
This week Oil prices started with a positive note after the coronavirus vaccine news and Russia reported that its oil output dropped to its target of 8.5 million barrels per day for May and June. Moving ahead to the mid of the week investors continue to follow the new updates from the US and China trade talks and weekly oil inventory reports. Overall the movement remained bullish so far this week on optimism that the worldwide business reopening should boost the basic energy demand. Oil prices trading bearish on Wednesday as the sentiment soured once again escalating tensions between the US and China.
The WTI oil price recovered from the April’s lows, now consolidating after printing fresh May’s highs. At the time of writing the price dropped around 1% from the daily high. WTI is usually extracted from US oil fields in Texas, Louisiana and North Dakota and the price is a benchmark for US oil prices.
So far this year the oil prices went through difficult times. But we hope the combination of production cuts and prospects of increasing oil demand continues to provide some support to crude oil prices. The IEA expects oil consumption eventually rebounding past pre-virus levels as lockdown restrictions ease, oil demand is expected to improve across several countries worldwide. Meanwhile, OPEC is scheduled to hold its next meeting early next month when supply cuts towards maintaining oil prices could be discussed.