Increase in Demand Further Lifts Oil Prices

By Adedapo Adesanya

Oil prices continue to rise steadily, moving higher by 6 percent as demand improved despite the uncertainty surrounding COVID-19 pandemic on Friday, according to new data.

The coronavirus pandemic has dealt a severe blow to economic activities around the globe and sent oil prices tumbling by over 50 percent so far this year.

Data released on Friday showed China’s daily crude oil use rebounded in April as refineries ramped up operations and this consequently pushed prices of the international benchmark crude, Brent, up by $1.74 or 5.6 percent to trade at $32.87 per barrel, while West Texas Intermediate moved up by $2.20 or 7.9 percent to $29.76 per barrel.

China’s refineries processed considerably more crude in April than they did in March, the country said on Friday.

According to China’s National Bureau of Statistics (NBS), the country processed about 13.1 million barrels per day in April, up 11 percent from the 11.8 million barrels it processed daily in March.

The latest number provided support on the demand side while on the supply angle, at least 9.7 million cuts by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers proved to push the markets to the bulls.

Oil prices have been lifted this week by signs that oil output is falling among OPEC and other major producers, and now, with gradual recovery making its way, it has renewed optimism for traders.

The International Energy Agency (IEA) noted in its latest forecast that as demand increases, it expects crude stockpiles to shrink by about 5.5 million barrels per day in the second half of 2020.

Meanwhile, US crude inventories fell for the first time in 15 weeks, the Energy Information Administration (EIA) said on Wednesday, leading prices up.

Output cuts will boost the trend towards lower inventories, but analysts noted that US crude is unlikely to see strong gains.

However, despite the good news, the coronavirus pandemic is far from over and with a new wave emerging in some countries where lockdowns have been eased, it poses a serious problem for the demand if government have to declare another lockdown.