On Thursday morning oil prices continued to see their earlier gains trimmed further for a second day, as the global oversupply persists despite the cuts that are already in place.
Rystad Energy’s Head of Oil Markets, Bjornar Tonhaugen, has offered the following comment:
"Comparing to the price fluctuations we’ve seen over the last month, oil losing or gaining less than a dollar’s worth is the new ‘stable’.
For a second day in a raw oil stopped its gaining spree. It is not that we are anywhere different to Monday and Tuesday. The fundamentals are the same. The gains oil has seen were just the market’s enthusiasm for entering May, or ‘the month of the OPEC cuts’.
But, as was expected, the reality of this month’s oversupply started to sink in. Rystad Energy has forecasted a surplus of around 13 million bpd for the month of May which, although stands at half the surplus of April, is significant.
Some oil oversupply will also last well into June before shrinking to more manageable levels.
Crude inventories have continued to build for another week and this will not stop for a while. Until of course the available storage capacity is exhausted.
Yes, production shut-downs have increased and we will come with an updated number for the US in a press release during the day, but still they are not enough yet to make sure storage capacity will suffice before balance rebounds.
A positive note? We see a slow market recovery coming from June as demand will indeed see a boost and most of the now unused produced oil will find more eager buyers.
But June is a few weeks away still and till then prices have to drop further in May before the recovery.
Some light price swings will not be unusual during the month though. Traders will be bullish in news of new shut-ins, although these are to be expected, and prices will be gaining on every new announcement of production curtailments. And they will be falling on every new announcement of strong stock builds. It’s the old art of trading, bread and butter for many."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/07052020/oil-continues-to-see-gains-trimmed/