Oil prices for futures contract maintained it’s recovery after suffering the heaviest loss in the preceding week due to fast exhausting storage facilities and massive decline in demand.
With the record deal agreed by OPEC+ on production set to kick in on Friday 1st May and more countries joining the output cut, as well as oil producers cutting production involuntarily due to unfavourable oil prices, there are indications that supply of oil will be greatly reduced in the coming months.
Norway has said it will cut oil output for the first time since 2002. ConocoPhillips an American multinational energy corporation said it will cut production by 420,000 barrels per day from June 2020
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- Reasons Behind U.S Negative Oil Price as It Recovers Above $1
Oil benchmark, brent crude is 10% up trading at $26.67 per barrel. Western Texas Intermediate (WTI) advanced by 16.3% trading at $17.52, Western Canadian Select (WCS) is up by 38.2% trading at $9.00, Bonny Light is up by 11.2% up trading at $16.51 while OPEC basket is 15.7% up trading at $14.36 as at 14:44 GMT on Thursday.
According to the head of trading house Mercuria Energy Group Ltd, U.S. output will fall by 2 million barrels a day in May compared with March and the price of crude has probably bottomed out.
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In addition to the production cuts, several countries like Germany, Italy, Nigeria, and Spain are announcing plans to ease the lockdown imposed in an effort to contain the spread of the novel Coronavirus. In China, traffic is returning to the streets as the lockdown in Wuhan and other parts of the country is lifted, supporting a boost in fuel demand and refining rates.
In the U.S many states including Colorado, Georgia, South Carolina, and Tennessee are already allowing movements as well reopening of some businesses. An ease in lockdown will come with a return of some economic activities which will spur demand for refined, and invariably for crude oil.