The four-week run of climbing crude prices continued through Wednesday, but prices fell on Thursday and Friday as doubts arose over the prospects for China’s economy and rising tensions with the US over the virus, the trade deal, and Hong Kong. Beijing said on Friday that it would not publish a growth target for 2020, casting doubts as to how quickly demand for oil will revive. Futures prices closed Friday above $33 in New York and $36 in London.
Oil prices continued to rise last week despite the uncertainty surrounding COVID-19. New York futures closed at $29.43 and Brent at $32.50. As US storage capacity is limited, it is questionable whether cash oil prices are as high as speculators have driven futures. US crude stocks decreased slightly the week before, raising the question of whether there is enough demand to consume new production. Washington now is allowing producers to put crude that they can’t sell to refineries or put into commercial storage to be pumped temporarily into the Strategic Petroleum Reserve.
Oil posted its first back-to-back weekly gain since February amid optimism that production cuts are beginning to eat into the massive supply glut. Futures in New York climbed 25 percent to circa $25 and $31 in London. Drillers are cutting production rapidly in response to ruinous crude prices. The number of US rigs drilling for oil fell to a level not seen since before the shale-oil revolution began at the beginning of the last decade. Last week’s data from the EIA supported the price move as US gasoline supplied, an indicator of consumption, rose by the most in almost two years last week, and nationwide crude production declined for a fifth straight week to the lowest since July 2019.
Crude posted its first weekly gain in a month as global production cuts start to lift physical markets. Futures in New York rose 17 percent last week to close at $19.78 in NY and $26.44 in London. Oil companies have announced significant production closures with Chevron saying it will shut down as much as 400,000 barrels of daily output, and Exxon reporting it will cut rigs in the Permian Basin by 75 percent by the end of the year. At the same time, OPEC+’s pledge to trim supply by 9.7 million b/d has gone into effect. Algerian Energy Minister Arkab, who holds OPEC’s rotating presidency, called on members of the cartel to implement more than 100 percent of their agreed production cuts. Globally, the number of rigs drilling for oil and gas fell almost 20 percent in April, and in the US, the oil rig count dropped by 53 to 325, a seventh straight week of declines.