Most experts believe the worst is over for oil markets. Prices have gone up from the record lows reached in April. This recovery, however, is largely the result of production cuts – both voluntary, courtesy of OPEC+, and involuntary, courtesy of low oil prices – rather than a firm growth of global demand.
Oil Prices During the First Half of 2020 ($ per barrel)
On balance, April will probably turn out to have been the worst month for oil markets this year. However, the prospect of recovery should be treated with caution; the dip was very deep and markets are rebooting from an extremely low point. OPEC+ efforts have raised prices. But this is proving difficult to maintain. In June, prices stopped increasing after a jump in May. It is still too early for the group to claim mission accomplished – any claim to success before 2021 is likely to be too early. To quote OPEC’s Secretary General, the oil markets are not “out of the woods” yet. The most important wild card for oil markets remains the health of the global economy, which in turn depends on the efforts to contain the spread of Covid-19. Here, uncertainty prevails.
World Economic Growth: Forecasts by various global institutions for 2020
“The global oil market’s new, strange alliance”, Dr Carole Nakhle, Jun 2020
“Back to too much oil?”, Lord Howell, Jun 2020
“The oil market crunch”, Dr Carole Nakhle, May 2020