Oil prices increased nearly 90% in May and more than 5% on Friday, boosted by anticipation of improved demand and aided by drastic supply cuts — after shockwaves from the coronavirus pandemic sent the oil market tumbling earlier this year.
The U.S. oil benchmark, West Texas Intermediate, ended May up 88%, by far its biggest monthly increase ever.
Still, experts caution reading too much into the monthly record as WTI is still around 46% below its January high of $65.65 per barrel; For the year, oil is down nearly 41% overall.
“It certainly doesn’t feel like it was oil’s best month ever,” Regina Mayor, KPMG’s global head of energy, told CNBC on Friday.
In April, the demand for oil plummeted by its steepest downturn on record as much of the world went under lockdown in an effort to slow the spread of the virus.
That month saw the price of U.S. oil turn negative for the first time in history — meaning companies were paying traders to take oil off their hands.
Since then, a global glut of crude has eased and demand has slowly begun to increase, fueled, in part, by consumers turning to the road — instead of public transportation — to travel, pushing prices higher.
“The oil market is finally coming to a balance soon,” with supply expected to match demand, Bjørnar Tonhaugen, head of oil markets for consulting firm Rystad Energy, told the Wall Street Journal.
In April, the world’s top oil producers, including the U.S., Russia and Saudi Arabia, agreed to cut the production of oil, ending an oil price war that saw the price of crude plummet amid a global economic crisis caused by the coronavirus pandemic. OPEC, the 14-nation organization in charge of regulating world oil production, and its allies agreed to cut production by 9.7 million barrels per day as the coronavirus outbreak caused demand for oil to plunge, as Bloomberg first reported.
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