By Adedapo Adesanya
Oil prices are expected to perform better this week, supported by continuing output cuts and signs of gradual recovery in fuel demand as more countries ease curbs imposed to stop the coronavirus pandemic spreading.
Last week, prices ticked up for the second week supported by some countries relaxing coronavirus restrictions and lockdowns to allow factories and shops to reopen.
Also, demand figures improved last month as a report showed that China’s daily crude oil output rebounded in April from a 15-month low in March as refiners cranked up operations to meet renewed fuel demand.
On Friday, China, through its National Bureau of Statistics (NBS), said it processed a total of 53.9 million tonnes of crude oil last month, equivalent to about 13.1 million barrels per day. This was 11 percent higher than 11.8 million barrels per day processed in March.
Also, the International Energy Agency (IEA) again last week forecast a record drop in demand in 2020 though it trimmed its estimate of the fall citing easing lockdown measures.
The Paris-based agency said the world’s demand for crude will drop by 21.5 million barrels a day this month, while producing nations and companies will slash output by 12 million barrels a day.
Notably, government-implemented coronavirus lockdowns have affected 4 billion people around the world this year, and demand for refined oil products like petrol and jet fuel falling drastically.
On the oversupply end, production is also falling as US energy firms cut the number of oil and natural gas rigs operating to an all-time low for a second consecutive week. That partly helped ease concerns about the WTI contract’s delivery point in Cushing, Oklahoma running out of space.
The world’s top exporter, Saudi Arabia, announced last week that it would cut an additional one million barrels per day in June, while OPEC+ wants to maintain existing oil cuts beyond June when the group is next due to meet.
Kuwait and Saudi Arabia have agreed to halt oil production from the joint al-Khafji field for one month, starting from June 1.
The United Arab Emirates (UAE) Minister of Energy and Industry, Mr Suhail bin Mohammed Faraj Faris Al Mazrouei, last week also revealed that the emirates will voluntarily cut its oil output by 100,000 barrels per day in June in a bid to back Saudi Arabia’s efforts to rebalance the world oil market.
These actions are bound to help strengthen oil prices this week, but analysts have noted that an even bigger headache for the rebalancing and recovery is the major uncertainty if coronavirus infections will start rising again in a second wave, after economies have started to re-open and lockdowns are being eased.
This worry has not affected the market so far, which opened $1 higher on Monday morning. Brent Crude is up 3.9% or $1.29 to trade at $33.79 per barrel, while the US West Texas Intermediate (WTI) was up 5.4 percent or $1.59 trading at $31.02 per barrel.
