Oil prices rose today on indications that supply has been sufficiently curtailed to balance demand and on news that US storage filling levels have dropped, unlike what the market had expected.
Rystad Energy’s Senior Oil Markets Analyst, Paola Rodriguez Masiu, has commented on the price rise:
"Today oil prices rose on very clear indications that the global supply has been curtailed to a great degree.
OPEC+ is complying well with its commitments to reduce output, but also US production has declined to such an extent that onshore storages saw some relief last week.
The rising filling levels were among the market’s main concerns over the last month and also a key reason that prices reached shockingly low levels previously.
It’s not that demand rose more than expected, it is up indeed but not to an extent to singlehandedly absorb all supply. It’s that production has indeed fallen by a great margin.
Shut-ins in the US were key to this development and the wave that was expected already reached the coast. Many producers have curtailed production and, although painful for them, it really did have an effect on prices.
We are on a clear path to a gradual recovery now.
If traders have a second thought in the back of their head now, that is the possibility of a rise in global infections and what it could bring. The market survived the first wave of lockdowns, painfully but it did. A second wave though could be catastrophic and producers are not prepared for that.
Meanwhile, prices will continue to be at ‘happier’ levels, as long as Covid-19 does not come back stronger after the easing of the lockdowns."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/21052020/oil-prices-continue-to-rise/