Crude Oil Surges to $35 as More Businesses Reopen

By Adedapo Adesanya

The Brent Crude hit $35 per barrel on Monday, May 18 for the first time since March on rising demand and slowing supply of the commodity at the market.

Yesterday night, Brent crude oil, the international benchmark, rose by 8.4 percent or $2.71 to $35.21 per barrel, while the West Texas Intermediate crude oil, the US benchmark, rose 10.1 percent or $2.98 to $32.41 per barrel.

Earlier in March, oil prices started to slide after Saudi Arabia flooded the market with oil in a price war with Russia for control of the market share. This coincided with when demand of the product started crumbling as countries began to declare a lockdown to curb the spreading of coronavirus.

But now, as the global economy is gradually reopening and the oil glut continues to ease off following the lockdown that ran for the month of April, in addition to global production cuts and recovery expectations drove oil prices higher.

With compliance from members of the Organisation of the Petroleum Exporting Countries (OPEC) and its partners towards  slashing output, prices are reacting positively because this has helped to stem a flood of crude that had failed to attract buyers.

With this, supplies are on course to drop by 12 million barrels, taking into account additional voluntary cuts from Saudi Arabia, the United Arab Emirates (UAE), and Kuwait which will remove an extra 1.18 million barrels of oil from next month.

Analysts see Monday’s gains as a good thing but remain doubtful whether prices would stay stable in the long term because of the coronavirus pandemic.

It is still unclear whether governments can resume economic activity without causing renewed outbreaks of the pandemic, the risk of a second wave of infections could bring about a fresh set of restrictions.

There are also worries about how far the OPEC+ alliance will implement promised supply curbs.

According to market analysts, the market remain in a “tug-of-war” pattern, where it remains unknown whether the damage will be a lot worse than feared or the recovery will be much swifter.