May rise: the price of Brent oil for the first time since April 9 exceeded $ 35 per barrel

On Monday, May 18, trading in the global energy market is accompanied by a steady increase in world oil prices. In the afternoon, the cost of raw materials of the reference brand Brent on the ICE exchange in London grew by almost 10% - up to $ 35.7 per barrel. The value became the highest since April 9th. At the same time, quotes of the American WTI variety added 12% and for the first time since March 16 exceeded $ 33 per barrel.

According to experts interviewed by RT, investors respond positively to reports of a gradual recovery in global oil consumption. According to the latest forecast of the International Energy Agency (IEA), in 2020 global demand for energy sources will decrease by only 8.6 million barrels per day. Earlier, specialists of the organization expected a deeper decline in the indicator - by 9.3 million.

Recall that since the beginning of the year, the coronavirus pandemic and quarantine measures in many countries of the world provoked a massive reduction in trade, passenger traffic and fuel consumption. However, today many countries have already begun to weaken the regime of restrictions. Thus, the gradual return of people and enterprises to work over time should again lead to an increase in global demand for hydrocarbons.

“Now there is more and more news about the revival of demand due to the gradual lifting of restrictions in different countries - people are beginning to use vehicles more actively. Currently, global consumption has recovered at 60% of the pre-crisis level. Against this background, quotes are growing, ”explained Artyom Deev, head of the AMarkets analytical department, in an interview with RT.

In addition to the expected recovery in demand, market players positively assess government measures to reduce global hydrocarbon supply. Recall, from May 1, to combat the global overabundance of oil, the countries participating in the OPEC + transaction, including Russia, began to reduce the production of raw materials by 9.7 million barrels per day. A decrease in production also began in several other countries - exporters of raw materials, including the USA, Norway, Argentina and Canada. 

“We see that oil production is also declining in countries outside the contour of the“ traditional ”OPEC + participants. For example, in the United States, in May, hydrocarbon production could decline by 1.2 million barrels per day, compared with March production maxima — around 12.87 million barrels per day. Moreover, taking into account the decrease in drilling activity, it is likely to continue oil production in the State and will continue to decline until the end of the year, ”said BCS Premier economist Anton Pokatovich to RT.

Since the beginning of 2020, the number of active oil rigs in the United States has more than halved and reached 258. The last time a similar value could be observed back in the summer of 2009. This is evidenced by the latest data from Baker Hughes.

According to experts, amid a sharp decline in oil prices in recent months, the extraction of raw materials has become unprofitable for most shale companies. As a result, American enterprises are forced to suspend operations on a massive scale.

In general, as IEA experts calculated, in May the supply of oil on the world market should decrease by 12 million barrels per day and reach the minimum level over the past nine years - 88 million barrels per day. In the following months, the total reduction in production by world hydrocarbon producers may reach 15–20 million barrels per day. This was previously stated by the head of the Ministry of Energy of Russia Alexander Novak.

“In general, the market positively evaluates these figures and perceives them as a statement of the fact that a balance of oil supply and demand will ultimately be found,” notes Artem Deev.

According to Anton Pokatovich, in the near future the situation in the global energy market will continue to depend on the dynamics of demand recovery and the global economy as a whole. At the same time, the expert does not exclude that by the end of the year the cost of oil could rise to $ 40 per barrel. At the same time, Artyom Deev admits a more rapid growth of quotations.

“Already in the short term - until the end of June - prices can rise to $ 40 a barrel, and by the end of the year, oil prices should reach an average level of $ 50-52. At the same time, forecasting is complicated by the fact that no one is sure of the second wave of the coronavirus pandemic due to the removal of restrictions on the movement of people in different countries, ”the expert concluded.