The easing of restrictions on epidemic prevention has led to a rebound in oil de

Release time: 2020-05-18

Dow Jones, May 15, 2020 -- oil consumption is picking up again in countries and regions that have eased their lockdown measures, helping to ease a global oil glut and rebalance a market that has been plagued by weak demand and plunging prices for months.So far this year, oil prices have fallen by as much as two-thirds.
The oil sector is showing signs of life as China eases its blockade, parts of the country are trying to get back to normal, and parts of Europe and the us allow companies to return to work.
The director of the international energy agency (InternationalEnergyAgency, IEA) (FatihBirol) birol said: "we have seen tentative signs of oil market gradually to restore balance, but still very slow, is also very fragile."He added that this year would remain the worst on record.
In its monthly oil market report on Thursday, the IEA said it expects global oil consumption this month to be 21.5 million barrels a day lower than a year ago.
Brent crude rose 6.6% to $31.13 a barrel on Thursday, while west Texas intermediate for June delivery rose 9% to $27.56 a barrel.West Texas intermediate rose 8.6 percent to $27.88 a barrel in July.Both brent and west Texas intermediate remain more than 50 per cent below their end-2019 levels.
The easing of restrictions across the region has been accompanied by large-scale, co-ordinated production cuts by producers such as Saudi Arabia, Russia and the us.As a result, global onshore oil inventories, which have been rising since the outbreak began in January, fell 2.2 million barrels in the week ended May 8, according to Kpler, a commodity analysis firm.
Saudi energy minister AbdulazizbinSalman and his Russian counterpart, AlexanderNovak, said in a joint statement this week that they were "pleased by the recent signs of improvement in economic and market indicators, particularly the growth in oil demand and the easing of concerns over oil storage capacity."
In April this year, the Saudi leadership of the organization of petroleum exporting countries (OrganizationofthePetroleumExportingCountries, referred to as: Opec) 10 countries agree to jointly with the Russian led production by 9.7 million barrels, to balance the oil market, and eliminate the excess supply of increasing the supply glut that global oil storage capacity under pressure.The agreement to cut production took effect on May 1.
Since then, Saudi Arabia, the world's largest oil exporter, has stepped up its own efforts to cut output to its lowest level in nearly two decades.Saudi Arabia said this week it would cut output to about 7.5m b/d this month, 1m b/d below the target it agreed to in the deal.
While the so-called Opec + deal is far from fully rebalancing the market, the drop in exports over the past three weeks will play a key role in preventing oil storage facilities from filling up, Kpler said.
Since the start of the month, global and U.S. benchmark oil prices have risen 23 percent and 46 percent, respectively, on hopes that a rebound in demand and production cuts will bring the market back into balance.
Saudi Arabia will raise the price of its popular Arab light crude by $6.55 a barrel in Europe, $1.40 a barrel in Asia and $1.50 a barrel in the us, in an optimistic sign that demand is starting to pick up.
The U.S. energy information administration (EnergyInformationAdministration, referred to as EIA), said the us crude oil inventories last week for the first time in nearly three months, fell by 745000 barrels.It had been expected to increase by 4.1 million barrels.
Restrictions in some big states, such as California and Texas, were eased on May 8th.KathleenKelley, chief executive of hedge fund advisory firm QueenAnne's gatecapitalmanagement, said he expected a strong rebound in motor fuel consumption because "as the U.S. states and countries restart their economies, people are likely to drive themselves, which is a relatively safe space compared to public transportation."
"They may be driving instead of short flights, which will also support gasoline demand," she said."
In China, where the outbreak began, oil demand is rebounding.Last week, China's refineries were operating close to pre-crisis levels, at about 13.3 million barrels a day, up nearly 3 million barrels from their lows at the end of February, according to paris-based commodity analyst Kayrros.
Chinese consumers also appear to be avoiding public transportation.Traffic congestion in wuhan, where the covid-19 outbreak began, was 54 percent on Thursday morning, compared with an average of 42 percent in the same period last year.Beijing's congestion rate was 73%, compared with 62% in the same period last year, according to TomTomInternationalBV, a Dutch location-based technology company.
In Europe, too, a new preference for commuting by car is evident;The outbreak has damaged oil demand in Europe more than anywhere else.In the UK, deputy chief medical officer Jonathan van-tam said this week that while bus, tube and rail travel in the UK remained sluggish, the use of motor vehicles was on the rise.