Oil Market Outlook
Oil prices recorded their third straight weekly gain as more economies are reopening following lengthy lockdowns and demand is recovering. The market also gained support from output cuts totalling 9.7 million barrels per day by Opec and its allies, even though that represents less than half the current global oversupply.
West Texas Intermediate (WTI) crude rose $4.69 to close at $29.43 per barrel. Brent climbed $1.53 to $32.50 and Dubai crude averaged $32.15. Thaioil forecasts that WTI this week will trade between $27 and $32, and Brent between $29 and $34. Prices are expected to gain as more countries ease lockdown restrictions, but investors will be watching for any signs of a possible second wave of coronavirus infections. Among the factors expected to influence trade:
Australia, Germany, France and some US states have lifted lockdown restrictions and some businesses have resumed after a drop in new Covid-19 cases. However, South Korea and China have seen some new clusters of outbreaks.
The Opec+ producing countries plan to meet early next month to review the effectiveness of their current output cuts. Saudi Arabia has announced plans to reduce its production in June by another 1 million bpd, to 7.5 million bpd, in response to low oil demand. A new report by Opec forecasts world oil demand for the full year to fall by up to 9.1 million bpd or 9.1% from 2019. That’s an even bigger drop than the decline of 6.8 million bpd forecast just two months earlier.
US crude inventories in the week to May 8 fell unexpectedly by 750,000 barrels, the first decline since January and counter to analysts’ forecast for a gain of 4.1 million. Refinery utilisation is just 68%, close to an all-time low, and while fuel demand has picked up, it’s still 23% below year-earlier levels.
The number of active US rigs drilling for oil and gas fell by 35 to an all-time low of 339, a 52% drop from a year ago, the energy services firm Baker Hughes says. The rig count has fallen by an average of 52 per week since mid-March as the pandemic and a brief RussianSaudi oil price war sent prices tumbling.
The US is injecting up to $3 trillion into its economy to help overcome the impact of Covid-19, but Fed chairman Jerome Powell says the recovery could take longer than expected and even more measures could be needed in a market where 36 million people — about a quarter of the workforce — are now unemployed.
Economic indicators to watch include Japanese Q1 GDP, Chinese and euro-zone interest-rate announcements, Fed meeting minutes and UK consumer prices.
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