The onset of COVID-19 ravaged the oil industry and put an abrupt stop to the longest bull market run in history. Oil and gas companies are making massive cuts to combat the low demand as a first step to recovery.
As the re-opening of the global economy slowly picks up steam, some optimists feel the price per barrel could reach $34-$40, though demand is still predicted to fall throughout May. Now that oil prices have been rebounding and worries are being eased by US oil inventories, (increasing by fewer than forecasted) these optimists are currently in the driver’s seat. West Texas Intermediate or WTI, prices settled at $20.06 logging in a 16.8% weekly increase on the NYMEX. Brent crude was up 1.9% at $26.93 a barrel on ICE Futures while contract prices climbed 6.6% last week. This gave way to futures contracts for June delivery and gained traction across the Asia Pacific market which is up to around a 20% increase.
The continued combination of production elimination in non-OPEC oil and the natural oil field production decline rate is dangerous. With the continual decline in demand for crude, during this COVID-19 pandemic, it is stated that ‘Sino-American tensions could produce more headwind for the crude asset. According to Fawad Razaqzada, market analyst for ThinkMarkets, “…it will likely be months before the global supply glut will be reduced given the demand is still very weak. So, oil prices are unlikely to recover meaningfully for a while yet.”