Oil prices news recently made headlines when the commodity headed into negative territory for the first time in history. 20th April 2020 will be remembered as a historic day as on that day WTI crude futures expiring in May 2020 went to -$40.32 per barrel, a stunning drop of 321%.
However, the oil market has stabilized ever since the OPEC+ countries were jolted into action. Production cuts and subsequent extensions of those cuts have led to a recovery in oil prices. WTI crude was at $39.87 on Monday, 8th June 2020 while the Brent oil price was at $42.81 a barrel. Brent has, in fact, doubled its price ever since the OPEC+ grouping decided to cut oil supply by 9.7 million barrels per day.
On 6th June 2020, OPEC+ extended those production cuts through the end of July. The cuts represent nearly 10% of the global oil supply. Following the extension, Saudi Arabia hiked its crude oil price for July by one of the biggest margins seen in the last two decades.
Low oil prices have attracted Chinese importers in recent times. China, the world’s largest crude importer, bought 11.3 million barrels per day in May 2020.
However, it remains to be seen whether the oil price rally can sustain. According to Helima Croft, RBC Capital Markets, “The potential return of Libyan output could also cause considerable challenges for the OPEC leadership.” Besides Libyan oilfields coming online, Iraq and Nigeria exceeded their production quotas in May and June when the production cuts were in place. Additionally, higher oil prices may lead to US shale producers coming back online as they have currently planned to remain shut for June and July.