Lagos — Although oil is still far from $100 per barrel yet, prices are starting to recover and could climb to $40 per barrel in June in line with major forecasts that predicted this prospect by the second half of 2020.
SweetcrudeReports tracker shows that price of Brent reached $34.94 as at 1:00 pm Nigerian time on Tuesday.
U.S West Texas Intermediate, WTI sold at $32.73, while OPEC daily basket price stood at $28.21 a barrel Monday.
Experts earlier in the month had forecast oil prices not hitting $40 per barrel until atleast second half in 2020, citing an already oversupplied market, low demand due to the Coronavirus pandemic which caused global movement standstill, plus inadequate storages to accommodate excess production.
Chief Executive of Qantas Airways’, Alan Joyce had said: “international travel demand could take years to return to what it was.”
“Travel demand is essentially zero for the foreseeable future,” United Airlines Holdings Inc spokesman, Frank Benenati was also quoted to have said. The carrier plans to cut at least 3,400 management and administrative jobs in October.
According to Mohamed Arkab, Energy Minister of OPEC’s rotating president Algeria, oil prices will hit $40 per barrel at the last quarter of the year.
“Together with the 9.7 million bpd cuts, OPEC and its allies pledged for May and June, these factors are set to lift the price of oil in H2 2020” Arkab said.
On his part, Chief Investment Officer at UBS Global Wealth Management, Mark Haefele agreed that the market will reach balance in third quarter but said it will not become undersupplied until the fourth quarter of the year as lockdown restrictions are eased and oil demand picks up.
“We forecast Brent to recover to $43 a barrel by year-end,” Haefele said.
However, tracker shows that most countries are beginning to ease months of lockdown as more vehicle movement and demand sweep across some African, European, and Asian countries, including several U.S. states.
Italy, Spain, Nigeria, Ghana, Ohio, India, and some U.S. states began allowing selected people to go back to work and opened previously shutdown companies, stores, banks, transportation, and essential service firms.
Nigeria- a country of over 200 million population, in a new broadcast on Monday signaled full reopening of its economy by May ending.
OPEC+ cuts exports sharply
OPEC+ has cut its oil exports sharply in the first half of May, suggesting a strong start in complying with a new production cut agreement.
The Organization of the Petroleum Exporting Countries, Russia and other allies, a group known as OPEC+, are cutting supply by a record 9.7 million barrels per day from May 1 to offset a slump in prices.
Kpler, a company that tracks oil flows, said OPEC+ seaborne oil exports have declined by 6.3 million bpd over the past month towards 27 million bpd, calling the decline a “stunning reversal” from April when producers pumped at will.
Petro-Logistics, another tanker tracker, estimated the producers cut exports by 5.96 million bpd for the first 13 days of May compared to April averages – a “massive” decline, the company posted in a tweet.
Of that, OPEC’s exports dropped by 4.85 million bpd in the first two weeks of the month, Petro-Logistics Chief Executive Daniel Gerber told Reuters.
According to Kpler, Saudi Arabia is showing the largest cutback. Saudi oil exports have averaged 7.26 million bpd, down 2.24 million bpd month on month. Russia is also making a large reduction of 922,000 bpd in May, Kpler said.
Kuwait and the United Arab Emirates have also reduced shipments significantly. The two countries have loaded a combined 4.25 million bpd onto ships for export, a drop of 1.26 million bpd month on month, Kpler said, adding that Iraq has cut exports by 265,000 bpd.
Refintiv Eikon data suggest a larger decline. Southern Iraq exports averaged 2.73 million bpd in the first two weeks of May, according to Refinitiv, a drop of more than 600,000 bpd from April.
Compliances from other OPEC+ members are expected to trickle in before May ends.
Reports from oil market traders as at Monday say demand are beginning to pick up, as a result, a gradual easing of global lockdown and increasing movements of humans, goods, and services.
These according to SweetcrudeReports calculations, could shoot prices to $40 per barrel in June.