Global Oil Market: Poised For Growth
It is interesting to observe the changes that have occurred in the global oil market during the past one month. Crude prices have started increasing during this period owing to a rising oil demand. This, indeed, is great news for the global economy which has been trying to regain momentum even as the COVID-19 pandemic threat looms large across the globe.
In the wake of the COVID-19 pandemic, across countries, people were in a lockdown mode. Gradually, the entire world has started realizing that the situation is not going to improve anytime soon. Therefore, many countries have rolled out plans for a phased exit from the lockdown. This, precisely, is the reason behind the rise in demand for oil.
Looking at the numbers, the West Texas intermediate (WTI) traded at over $30 per barrel mark for the first time in two months. The same was trading at minus $37 per barrel when the May contract was rolled over. During the third week of May, Brent also traded at $32.17 per barrel in Europe, signifying better price recovery, albeit gradual. The estimates of both the International Energy Agency (IEA) as well as the Organization of the Petroleum Exporting Countries (OPEC) look promising.
The situation has improved on the supply side as well. Production from the OPEC+ (comprising OPEC members and 10 associated countries) will soon be touching 11 million barrels per day. Experts, in their estimates, have greatly improved upon the previous calculation regarding production cuts. This augurs well with rising oil demand, globally. They are of the opinion that the global oil market has just overcome its worst phase and has embarked on a journey of upward growth.
Lower oil prices have come as a jolt to the economies of oil exporting countries. Countries like Saudi Arabia, Kuwait and the UAE have taken the welcome step of moving beyond the production cuts announced earlier.
While the overall situation looks positive, there is no denying the fact that complete recovery from the impact of the COVID-19 pandemic will be gradual and will take time. The same will reflect in the pattern of oil demand worldwide. The economic downturn has affected countries of the world alike. But as things stand now, there is hope for a brighter future ahead.