Month in Brief

• Date: 01 July 2020
• DOI: http://doi.org/10.1111/oet.12804
• Published date: 01 July 2020

THE MONTH IN BRIEF

Month in Brief

The month began with prices moving higher, as markets

factored in an improving global demand picture and

signs of tight compliance among most OPEC-plus mem-

bers to the group's 9.7 mn bpd output cut, agreed in

April. ICE August Brent rose steadily through the first

week from $38.32/bbl on Monday the 1st to $42.3/bbl on

Friday June 5th, with added impetuous from a further

tightening of supply at an OPEC-plus meeting on the

Friday—which extended June's cuts into July, rather

than the original plan of a slightly lower cut. There was

also support from a fall in crude stocks (by 2.08 mn bbl)

in the US midweek, as refinery utilization edged up to an

8-week-high of 71.8% and storm Cristobel hit crude out-

put from the US Gulf.

Through the second week of June, prices retreated as

questions over demand recovery resurfaced, with Brent

falling back $3.75/bbbl to 38.55/bl by the close on

Thursday 11th. Concerns over demand were com-

pounded on the Wednesday as US crude stocks rose by

5.72 mn bls to a record 538.07 mn bls on reduced exports

and on-going low refinery throughput. Prices were partic-

ularly weak the following day amid concerns in the US

over rising Covid-19 cases, which saw July WTI fall $3.26

to $36.34 bbl on the day. At the end of the week, there

was some support from news that OPEC-plus had hit

85% compliance with its massi ve 9.7 mn bpd cut in May

(20% of the 23 member groups total output).

The third week of the month saw a steady rise back

up again to $41.29/bbl for Brent by Friday June 19th. This

was underpinned by signs of rising demand, including

record refinery runs in China in May of 13.69 mn bpd;

and in Japan, where an increase in gasoline demand

pushed up refinery runs. A relaxing of restrictions in

Malaysia also pushed up demand in southeast Asia, and

Europe saw signs of a significant recovery through the

week. Buoyant stock markets were also supportive. How-

ever, US crude stocks reached another record high,

which, combined with a rise in Covid-19 cases in China,

after many weeks of nothing, led to a dip in prices

midweek.

The final full week of June began with another rise,

helped by a slight improvement in US refining margins

as states reopened and demand for exports picked up,

which encouraged some refiners to raise throughput.

Prices then fell back (dropping over $2/bbl on 24 June) to

$40.31/bbl for Brent by the middle of the week as signs of

a resurgence in Covid-19 cases in the Americas and south

Asia threatened to dampen economic recovery. Crack

spreads dipped slightly in response, after rising in the sec-

ond and third week of June. By the end of the month, the

deep contango seen in both WTI and Brent since March

had shallowed, suggesting a reduced prompt crude sur-

plus, including less in floating storage, which in turn soft-

ened freight rates. The last couple of days of the month

saw prices edge higher, to end up about $3/bbl on the

month at around $41.50/bbl.

How to cite this article: Month in Brief. Oil and

Energy Trends. 2020;45:7. https://doi.org/10.1111/

oet.12804

DOI: 10.1111/oet.12804

Oil and Energy Trends. 2020;45:7. wileyonlinelibrary.com/journal/oet © 2020 John Wiley & Sons Ltd 7