Month in brief

• DOI: http://doi.org/10.1111/oet.12800
• Published date: 01 June 2020
• Date: 01 June 2020

THE MONTH IN BRIEF

Month in brief

After crude prices fell to record lows in April, May has

seen something of a recovery, with Brent prices up by

more than a quarter over the month to around $35/bbl.

WTI has been particularly strong, gaining ground early

in the month as more US producers announced output

cuts, easing the logistical issues that had sent the inland

WTI contract into negative territory last month. In the

first week of the month, weak economic data weighed on

demand outlooks, with Brent dipping early on, before ral-

lying on the 5th to settle above $30/bbl, alongside strong

gains in WTI on signs of a recovery in gasoline demand

in the United States and mounting output cuts. The rally

was underpinned by firmer product prices, signaling a

pick-up in product demand leading to higher refinery

crude demand and throughput.

Prices then eased back over the following 2 days on

continued uncertainty over the extent of the Covid-19

impact on demand, before firming again on Friday,

8 May. There had been some strength early Thursday

after Saudi Aramco raised its June official selling prices,

signaling an easing in the 2-month price war. But the

price surge prompted a wave of selling pressure as traders

booked profits amid uncertain supply and demand out-

looks. Traders remained cautious as they looked for con-

firmation that the market was balancing again, and that

surplus supply would begin to reduce. Market contango

began to shallow, however, with the July WTI contract

falling to a $1.28/bbl premium to front-month on

7 May—the weakest front-month to second-month conta-

ngo since 20 March.

On 11 May, the market saw further support from

OPEC's core Gulf members Saudi Arabia, the UAE, and

Kuwait, which announced voluntary additional (on top

of those agreed in April OPEC-plus deal) crude oil

production cuts in June, including 1 mn bpd more from

Saudi Arabia. Nevertheless, oil prices then fell back again

as a resurgence of coronavirus cases in some Asian coun-

tries overshadowed phased re-openings in Europe and

North America. But midweek saw an unexpected crude

stock draw in the United States, confirming that crude

output cuts alongside higher refinery demand were

beginning to clear the glut of crude built up in April.

Upward pressure continued amid optimism that faster-

than-expected producer cuts and improved demand out-

looks could create a supply deficit before year's end,

which was helped further by news of an April rise in Chi-

nese refinery throughput and crude imports, compared to

last year.

The following week, prices kept on rising, with Brent

reaching $36/bbl by 22 Thursday, following the announce-

ment of further falls in US output to 11.5 mn bpd and a sec-

ond week's crude stock draw in the United States, although

resurgent US-China trade tensions dampened sentiment

somewhat. Prices then held fairly steady for a few days,

before edging up again on the 26th on signs that the contin-

ued reopening of economies in the United States and

Europe was beginning to see demand return to more nor-

mal levels. Prices then slipped back slightly as the focus

turned to a lack of consensus among OPEC-plus members

ahead of the group's next meeting on 8 to 10 June, with

Brent dipping below $35/bbl at the end of the month.

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

Energy Trends. 2020;45:6. https://doi.org/10.1111/

oet.12800

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