By Adedapo Adesanya
Oil prices ended the month known as Black April on a brighter note, recording more than 20 percent gains on Thursday, April 30.
This was helped by major oil producers putting plans to cut oil production in motion.
The market, which had pulled a positive performance on Wednesday, sustained the growth with the Brent crude jumping by 12.11 percent or $2.73 to $25 per barrel. Also, the American West Texas Intermediate (WTI) went up by $4.08 or 27.09 percent to sell for $19.14 per barrel.
With this, crude futures were able to cutback a little on their losses for the month known as Black April – the worst for oil since 1995.
Oil prices have experienced swings of both downward and upward volatility during the month of April to the extent that the US oil prices turned negative for the first time in history, while Brent dropped to a new low in 20 years and fuel demand worldwide slumped about 30 percent.
On Wednesday, hope of treatments for COVID-19 and the anticipation that major world economies will eventually restart helped to stabilize expectations for greater appetite for crude in the future.
On Thursday, the market swung upward as market awaited the commencement of the oil supply reduction deal starting today.
The agreement reached earlier in April is that oil producers will cut their overall crude oil production by nearly 10 million barrels per day for an initial period of two months, May 1 to June 30, 2020.
For the subsequent period of 6 months, from July 1, 2020 to December 31, 2020, the total adjustment agreed will be 8 million barrels per day. It will be followed by a 6 million barrels per day adjustment for a period of 16 months, from January 1, 2021 to April 30, 2022.
Oil producers like Saudi Arabia, Russia, Kuwait, Nigeria, among others have already started implementation of the cuts and outside members that joined the deal like Norway announced its first cut with production in 18 years on Thursday.
The country would reduce output by 250,000 barrels per day in June and 134,000 barrels per day during the second half of the year.
Prices also rallied on signs that demand for storage of oil is coming off recent highs. A report from the US Energy Information Administration (EIA) showed that inventories of oil rising by 9 million barrels last week, significantly lower than the 10.6 million barrel increase forecast by analysts.
This built on news that many large economies are moving to lift the most stringent of coronavirus lockdown measures, which should boost demand for oil as more people can move around now.
Despite the likely rebound in oil demand, there is still a massive global glut of oil to be cleared before there can be any meaningful price recovery. The global oil demand might take a while to recover.
Oil has been hit by worries about oversupply by major producers due to the COVID-19 pandemic which has wrecked crude demand, while storage problems for the commodity has served to further spelled trouble.
Dipo Olowookere