Oil Market Volatility Persists Amid Ease on Lockdown

By Adedapo Adesanya

Oil prices switched between gains and losses on Tuesday as the market reacted to a mixture of good news and existing problems.

On one bad side, the demand and piling storage facilities worries remained with no end in sight. On the good side, the gradual lifting of lockdowns by some countries continue to give producers hope.

As at 9pm on Tuesday, April 28, the Brent crude, which is the international benchmark, was up by 4.35 percent or 87 cents to sell at $20.86 per barrel.

For the United States benchmark, the West Texas Intermediate crude, it was rising by 3.99 percent or 52 cents to traded at $13.29 per barrel.

A number of European countries have taken tentative steps to reopen their economies and being a continent that is a major destination for crude, the market swung towards it even as demand worries persist.

Nigeria also announced a gradual easing of lockdown from next Monday as countries like the United States, France, and others are laying plans to reopen their economies.

Oil prices remain under historical pressure due to lack of demand as the coronavirus has crippled economic activity and brought every major economy to standstill.

Lack of storage options, particularly at a key storage facility in Cushing, Oklahoma, and the reduction in demand for the commodity during the ongoing coronavirus pandemic has tanked prices in recent days.

These factors have so far driven WTI to turn negative for the first time in history last week, and Brent followed some of the losses, dropping to two-decade lows.

With businesses activities reopening, demand will gradually pick up, but there is a huge doubt surrounding a long-term effect for the market. One step that is giving optimism is the expected cut of 10 percent in global supply from next month.

Earlier this month, Organisation of the Petroleum Exporting Countries (OPEC) and its oil-producing allies agreed to a record production cut that will take 9.7 million barrels per day off the market beginning Friday, May 1.

And as the date draws closer, producers like Saudi Arabia have scrambled to cut production ahead time, while the US has slowed down drilling operations in efforts to prevent oil prices from tanking further.