Abu Dhabi: Oil markets closed on their second weekly high on Friday, with Brent trading on $30.97 and West Texas Intermediate (WTI) at $24.74, as prices continued to react positively to production cuts by Opec+ along with economies slowly reopening from their COVID-19 lockdowns.
“Brent futures added more than 17% and ended the week just shy of $31/barrel while WTI settled at $24.74/b, up more than 25% during the week. Brent futures have gained more than 60% since hitting their bottom of $19.33/b in mid-April while WTI’s turnaround from negative pricing has been tremendous,” said Edward Bell, commodity analyst at Emirates NBD.
“As we noted last week oil market microfactors appear positive even as the broader economic variables—the US unemployment rate skyrocketing to 14.7% for April or India’s April PMI in the single digits—remain dire,” he added.
Bell noted that while demand might be slightly picking up, markets remained extremely volatile incase of a second wave of COVID-19, which in turn would send demand plummeting once again.
“There have been some signs of demand as some economies take tentative steps to reopen. Gasoline consumption in the US has gained for the last four weeks running, coming close to 7 million b/day in the latest data from the EIA (Energy Information Administration). However, it is still down by 27% year-on-year.
“Whether the US reopening major parts of the economy is premature is yet to be seen: a second wave of infection could cut short any putative recovery in oil demand nor is demand in the US likely to get its normal seasonal bump as the virus will likely limit summer driving holidays,” he added.
All eyes on Opec and IEA reports
This week will also see the release of monthly oil outlook reports by both Opec and the International Energy Agency (IEA). The IEA forecasted oil demand to fall by 9.3 million bpd this year in their previous report, with Opec projecting demand to drop just below 7 million bpd.
Rystad Energy, meanwhile, projected oil demand to drop by 10.9 per cent this year in their latest weekly forecast, with total oil demand set to reach 88.7 million bpd this year, down by 10.8 million bpd compared to 2019.
“May’s demand is expected to fall by 21.3% to 77.7 million bpd. June’s demand is forecast at 83.5 million bpd, down by 15.0%,” their report said.
“Among the various fuel sectors, we expect jet fuel to be hit the hardest… We see global jet fuel demand falling by almost 33.6% year-over-year, or by at least 2.4 million bpd. Last year’s demand for jet fuel was about 7.2 million bpd,” the report added, highlighting how demand was seeing its biggest drop among the airline industry, with passenger services brought to a complete halt in the face of travel restrictions.