The limited rebound in oil

The April 20 crash is moving away. The American barrel of crude oil then fell dramatically, reaching a negative price, – 40 dollars: due to the saturation of storage capacity, producers wanted to get rid of their shale oil. Since then, prices have gone up.

→ READ. State of emergency for American shale oil

On May 18, a barrel of West Texas Intermediate (WTI) gained more than 10% in a day to more than 30 dollars in New York, reducing the spread with European Brent (+ 7% to 34 dollars). Signs of renewed activity in China have supported this trend, as have decisions by OPEC, the Organization of the Petroleum Exporting Countries.

Chinese restart

The publication of a better than expected industrial production figure in China was an encouraging sign for the demand for black gold. Industrial production officially increased in April for the first time this year, + 3.9%, after – 1.1% in March. In addition, renewed activity in Chinese refineries supported imports, which helped to absorb the abundant world reserves.

The limited rebound in oil

Reduction of the imbalance between supply and demand

OPEC, for its part, has implemented voluntary production reductions. The Saudi energy ministry has announced a further reduction of one million barrels per day, or about 10%, from June to support price stabilization.

→ READ. Coronavirus, oil … Iraq on the brink of collapse

The American Energy Information Agency (EIA) estimates that shale oil production will drop by nearly 200,000 barrels / day in the United States in June compared to May.

Doubts about the persistence of the rebound

Mirabaud Securities, however, believes that “ the reduction in supply is not enough to compensate for the weakness in demand ” The study, released on May 12, doubts the sustainability of the oil rebound, noting that ” Investors Disregard Radical Change in Consumer Behavior in a Post-Coronavirus World ” Air travel, road transport and petrochemicals will therefore not return to a level of activity “Normal” before a few months.

It is therefore not established that economic reopening around the world will allow demand for oil to take off. According to the cabinet, in the same way as ” you cannot give a donkey who is not thirsty to drink “,” we do not excessively consume an industry that is not running at full speed »: It is therefore better to remain careful. Brent crude prices fell slightly again on May 19. The recovery period does not seem to be over.


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