Oil prices in global markets rose last week, marking the third consecutive week of increases, as many countries around the world are easing restrictive measures related to the suppression of the coronavirus, leading to an increase in demand for 'black gold' while supplies are decreasing. In the London market, the price of a barrel rose by 5.2% last week to $32.50, while in the American market, the price of a barrel increased by almost 20% to $29.43.
Oil prices had been under pressure for months, sliding to their lowest levels in about 20 years, as all major world economies plunged into recession due to the coronavirus crisis, sharply reducing demand for 'black gold'. However, in the last three weeks, prices have significantly increased as many countries ease restrictive measures, given the slowdown in the spread of the coronavirus, leading to stronger demand for oil and declining supplies.
In the last three weeks, the price of black gold has risen a total of 65%! This increase in the price of crude oil has also reflected on the so-called Mediterranean market, resulting in an increase in fuel prices in Croatia. Given the increase in demand for fuels in Europe, and considering the rise in barrel prices, an increase in fuel prices in Croatia can be expected. However, this is currently only an assumption. During the afternoon on Monday, the portal cijenegoriva.info may also publish an unofficial announcement regarding price movements from Tuesday, and on Tuesday it will be officially known whether there will be price increases or not.
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A report from the U.S. government, published on Wednesday, showed that crude oil inventories in the U.S. fell last week for the first time since January. The International Energy Agency (IEA) has estimated that global oil inventories will decline by about 5.5 million barrels per day in the second half of the year. However, it also predicts a decline in demand this year, by 8.6 million barrels per day.
However, the world’s largest producers have already sharply reduced production. Recently, the Organization of the Petroleum Exporting Countries (OPEC) and independent producers led by Russia agreed on the largest production cut in history, by 9.7 million barrels per day, which took effect on May 1.
"The recovery of oil prices has been supported by new signs of demand recovery, along with increased supply restrictions from OPEC+, and the suspension or natural decline of production in non-OPEC+ countries," says Bjarne Schieldrop from SEB. Additionally, data shows that production in the U.S. is rapidly decreasing. A report released on Friday by Baker Hughes indicated that the number of active drilling rigs in the U.S. fell for the ninth consecutive week, by 35, to just 339, the lowest level since these data have been tracked, as the oil industry reduces production and investments due to low oil prices.
„The number of active rigs in the U.S. has decreased by 52% since the beginning of the year, by more than 400 rigs,“ write analysts from Enverus DrillingInfo in their market overview. However, the market is not euphoric as the end of the coronavirus pandemic is still not in sight, and new cases of infection are emerging in countries that have begun to ease restrictive measures.
"In our opinion, given the scale and speed of the disruption, it will take more time to fully absorb the accompanying increase in inventories," says Amarpreet Singh, an analyst at Barclays. That bank raised its oil price forecasts for this year by $5 to $6 last week, so the average price in the London market could be $37, and in the American market $33 per barrel.
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