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FX168 Financial News (Hong Kong) News Oil prices soared on Tuesday (May 5) due to optimism about continued production cuts and rising demand due to the reopening of the world economy.
West Texas Intermediate Crude Oil (WTI) rose 20.45% to $ 4.17, closing at $ 24.56 per barrel. The contract rose 3.08% on Monday, closing above $ 20 for the first time since mid-April and rising for the fifth consecutive day, the largest daily increase since July last year. International benchmark Brent crude oil futures finished 13.86% higher at $ 30.97 per barrel, and rose for the fifth consecutive day.
Per Magnus Nysveen, chief analyst at Rystad Energy, said: “Obviously, the bottom of the demand has passed, which is reflected in rising oil prices.”
US President Trump weighed up the price increase and wrote in a tweet Tuesday morning: “As demand begins again, oil prices are rising well!
(Source: Twitter)
As the new coronary pneumonia pandemic spreads globally, the cliffs of oil demand have diminished, making air travel almost stagnant. According to some estimates, world demand fell a third in April.
But as the economy gradually reopened, many states in the United States, including Florida, began the first phase of the reopening plan on Monday, and millions of Italians will return to work this week. Investors believe that demand will increase.
Royal Bank of Canada analyst Michael Tran said in a report to clients on Tuesday: “The reopening of the economy has injected some degree of cautious optimism into the oil market, and the oil market only fell to record lows a few years ago. weeks. “
Alerian Research Director Stacey Morris added: “There is reason to believe that the worst disruption in demand has ended. Comments from various companies indicate that US demand will improve in late April, especially for gasoline.” .
As demand prospects improve, producers have reduced production, which has also supported prices. Historic production cuts by OPEC and its oil-producing allies took effect on May 1, with a reduction of 9.7 million barrels per day.
In the United States, data from the United States Energy Information Administration shows that the average weekly production for the week ending April 24 was 12.1 million barrels, approximately 1 million barrels below the lowest level. high since March. Faced with low prices, ExxonMobil, Chevron and ConocoPhillips have reduced production.
However, the recent strength of oil has barely weakened its historical decline. West Texas Intermediate Crude Oil and Brent Crude Oil are in a bear market, falling 68% and 62% from the 52-week highs, respectively. The rate of decline is also rapid.
Market participants said the path to recovery in oil prices will be long and uncertain. Even though global producers have cut operations, global storage is filling up fast, and some believe that tank tops can be reached in a few weeks.
Stacey Morris: “The road to recovery in oil demand in the United States and around the world is still pending. The market remains fragile.”
He added: “The existing problems have not been fundamentally resolved and the storage restrictions still exist. We are still very cautious in the short term, but we believe that prices will increase in the long term.”
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