On Monday morning, Brent crude gained about 3% percent to trade at $33.83 a barrel at 2.30 am Nigerian time, as world economies around the world re-opened businesses, coupled with the resumption of air travels around emerged markets.
“Oil prices extended their recovery for the third week running as sentiment toward demand improves as more countries ease their lockdown conditions and allow for economic life to return to something approximating pre-coronavirus conditions,” said Edward Bell, commodity analyst at Emirates NBD told Gulf news.
“For the month of May alone, the improvement in oil futures has been dramatic: Brent has gained nearly 30% while WTI (West Texas Intermediate) is up by around 56%. June WTI futures expire this week but the relative improvement in sentiment toward crude and easing concerns over whether storage was reaching tank tops should prevent a repeat of last month’s hysteria when expiring futures moved into negative prices for the first time ever,” he added.
In addition, car driving in the western world is picking up, while refineries in China (second-largest economy in the world) are buying more crude oil as its economy reopens.
This may look like a minor miracle, given that crude oil price was about $60 at the beginning of 2020. Even after the recent rally in crude oil, prices are half of what they were at the beginning of the year.
However, on April 20, the U.S. oil plunged for the first time to zero, as some oil traders paid oil buyers to take oil off their hands.
“May, it seems, is a month when traders can finally sit back more comfortably for a moment and take a breath,” said Bjornar Tonhaugen, head of oil market research at Rystad Energy in an interview with New York Times.
He continued by saying, “We warn that the second half of the year will not be met with pre-crisis oil prices again, as the gigantic oil stock overhang must first be worked down.”
Crude oil experts warn that oil prices may plunge again if there is another surge in COVID-19 caseloads and deaths, as governments begin allowing easing movement of people and restart of economic activities.