Oil prices continued their upwards trajectory this afternoon, dispelling fears of a repeat of last month’s price implosion as the countries around the world continued to move out of lockdown restrictions.
Worldwide standard Brent crude broke through the $35 mark, rising nine per cent to stand at its highest levels since March.
West Texas Intermediate, the US benchmark, turned in an even more impressive effort, climbing 11.4 per cent to $32.78.
With WTI’s June delivery contract due to expire tomorrow, anxiety that the market would see prices turn negative again appears to be misplaced, with the oil market showing increasing signs of balance after April’s historic volatility.
The rises are down to a number of factors, with strengthening oil demand due to countries beginning to restart economic activity corroborated by record production cuts from oil producing nations.
According to data from Kpler, a firm which tracks oil flows, Opec+ countries are thus far complying with record 9.7m barrel a day cuts, helping stabilise the market.
In the UK, fuel demand has begun to pick up as more people have started to return to work.
According to the Petrol Retailers Association, Britain’s fuel demand was down 40-45 per cent year-on-year in the past couple weeks, compared with a 65-70 per cent decline earlier in the country’s lockdown to limit the spread of coronavirus.
Speaking to Reuters, PRA chief Brian Madderson said: “The market has been recovering quickly over the last couple of weeks”.
Analysts however warned that downward pressure on oil prices would continue, with demand unlikely to return to pre-coronavirus levels for some time.
ING analyst Warren Patterson said: “Clearly the fundamentals in the market are improving, but we continue to believe that the market is rallying too much too soon, with the risk that further strength will only prolong the supply and demand imbalance”.