Oil Market Outlook
Crude prices climbed last week following the easing of lockdown restrictions in many countries including the United States as the spread of the coronavirus appeared to be slowing.
As economies reopen, demand for oil products is creeping up, while output cuts totalling 9.7 million barrels per day (bpd) by Opec and its allies have begun to eat into the massive global supply glut.
West Texas Intermediate (WTI) crude rose $5.90 to close at $24.74 per barrel. Brent climbed $5.70 to $30.97 and Dubai crude averaged $26.01. Thaioil forecasts that WTI this week will trade between $22 and $27, and Brent between $27 and $32. Prices are expected to climb this week as more economic activity resumes. Among the factors expected to influence trade:
Germany, Italy, Spain, Nigeria and India, as well as some US states, have been gradually reopening, but authorities are on the alert for a possible new wave of Covid-19 cases that might necessitate fresh curbs.
Saudi Arabia has cut its production by over 6 million bpd to a decade low as it leads the Opec+ effort to reduce output by 9.7 million bpd in May and June.
Norway will cut 250,000 bpd, or 13% of its overall capacity, in June, with cuts averaging 134,000 bpd for the second half of 2020, marking the country’s first output cuts in 18 years. The Opec+ reductions, combined with cuts by Norway, the US and Canada, could remove 13-15 million barrels from the market. But excess global supply averaged 21.3 million bpd in April, Standard Chartered estimated last week.
Saudi Arabia took another unexpected step to support oil prices last week when it raised its official selling price to Asia for June by $1.40 per barrel, setting it at a discount of $5.90 to the Oman/Dubai average. Analysts said this suggested Riyadh was more interested in better prices than in market share, which had been its preoccupation before the market crashed.
The number of active US oil rigs fell by 33 last week to 292, the lowest since September 2009, while gas rigs fell to 80, the lowest on record according to Baker Hughes data going back to 1987.
US crude inventories in the week to May 1 rose by 4.6 million barrels, less than analysts had forecast, to 532.2 million, while inventories at the Cushing, Oklahoma delivery point rose by 2.1 million barrels to 67 million, a three-year high. Petrol stocks fell by 3.2 million barrels, indicating an upturn in fuel demand in some states. Refinery capacity utilisation inched above 70% for the first time in several weeks.
Economic indicators to watch include Chinese and US consumer prices and euro-zone April GDP.