On Monday oil prices continued on the positive note with prices rising by more than $1 dollar. The demand for oil is gradually improving as several countries around the world slowly open for economic activities following the lock-down to control Covid-19 pandemic.
Fuel demand is increasing modestly due to ease on movement restrictions in the United states, Europe, Asia and Africa.
U.S oil futures, Western Texas Intermediate (WTI) rose by $1.58 and is trading at $31.01 per barrel, which represents a 5.37% increase while Brent crude is trading at $33.7 per barrel, a 3.69% increase of $1.2 per barrel as at 09:03 GMT of Monday.
Nigeria Bonny light traded at $29.84 whereas Western Canadian Select (WCS) is trading at $23.26
Oil prices have risen ahead of U.S June futures contract expiry on Tuesday, contrary to what happened in April prior to the expiry of May contracts. On April 20, oil witnessed its greatest fall in history as it traded at negative prices which saw oil traders pay buyers as much as $40.32 per barrel to take the oil off their hands due to the fear of not having storage capacity in May.
On Friday oil prices made weekly gains for 3 consecutive weeks. These appreciation in prices can be largely attributed to dampening supply glut and improving demand thus reducing concerns for unavailability of storage facilities.
Several production cuts have been made by oil producers including oil majors in the U.S. Saudi Arabia had on May 11 announced a voluntary cut in oil production by additional 1million barrel per, which will see the Kingdom’s production reduced by around 4.8 million barrels in June 2020.
The secretary general of OPEC, Mohammad Barkindo in a TV interview with Bloomberg said that the organization optimistic that the worst days for the oil crisis are over.
Mohammad said that, “here at OPEC, we remain cautiously optimistic that the worst is behind us. The outlook for the second half of the year is beginning to look encouraging and positive that there will be a rebound”.
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As most activities begin to return in most states in the U.S. The Federal Reserve Chairman Jerome Powell on Sunday night broadcast, gave a positive hopeful outlook on the recovery of economic activities going forward in 2020.
He said, “assuming there is not a second wave of the coronavirus, I think you will see the economy recover steadily through the second half of this year,”
On Friday, Barclays Bank says that it sees the prices of Brent and WTI selling at average price of $37 and $33 per barrel in 2020 while 2021 prices will average at $53 and $50 per barrel respectively. The bank also said that it does not expect the WTI prices to go into negative territory again.
Baker Hughes on Friday reported that the number of oil and gas rigs in the US fell again this week by 34 to all-time low for a second consecutive week.
Going forward, if demand for continues to improve due ease of lock-down, and the production cuts maintained by the oil producers, there seems to be a gleam future for oil prices.
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