With more cars back on the roads as lockdown eased across the world, oil producers would have taken a sigh of relief as some revival of oil demand was seen on the horizon. Crude oil prices crashed and troughed in April 2020 into the negative territory, sounding alarm bells across the oil and gas markets. However, since then prices have recuperated with May 2020 posting a noticeable recovery as economies came out of lockdowns.
The story is not only about demand recovery. A key role is that of supply cuts agreed by OPEC+. The rebound in oil prices had a share of production curtailment decided by OPEC+ in their last meet in April when the world's major producers, including Saudi Arabia and Russia, agreed to cut their collective output by around 10 million barrels per day for May and June.
Another key factor for a recovery in oil prices has been the continued fall in US rig count and that too at a record pace. the decline in rig count is an indicator of a likely lower future production, which has been a factor in lifting WTI prices.
With visible recovery in crude oil prices last month (May 2020), all eyes are now set at the upcoming OPEC+ meeting scheduled early next week where decisions about maintaining or tapering the deep cuts will take place. There is all likelihood that the group will extend the existing deep supply cuts in July, August and maybe September as well to shore up prices as per various global analysts as prices are still over 40 percent lower today than they were at the beginning of the year 2020.
Also, Saudi Arabia is s expected to lift its official selling price (for all grades it sells to Asia in July according to Reuters survey, which is another sign that production cuts will be extended and maintained.