- OIL FUTURES: Crude rally extends as market eyes producer cuts, economic restarts
Singapore's fuel oil imports from the Middle East unlikely to rise in May on high freight rates, inventoriesMay 4
Crude prices settled sharply higher for a second session Thursday as stepped-up producer cuts underscored improved demand outlooks.
NYMEX June WTI settled up $3.78 at $18.84/b and ICE June Brent was $2.73 higher on the day at $25.27/b.
Reports of falling non-OPEC production pushed crude futures higher overnight.
In a statement late Wednesday, Norway's petroleum and energy ministry said crude production would be cut by 250,000 b/d in June and 134,000 b/d through the second half of the year, in accordance with a clause in the country's petroleum act allowing curbs based on "important interests of society."
"Big oil is starting to have landmark moments that signal deeper production cuts across the globe will be happening quickly," OANDA senior market analyst Edward Moya said. "Oil prices are looking very constructive because over the next month or two, supply will meet demand. Oversupply worries are slowly easing and with the exception of sudden dislocations in the oil market, crude prices could continue to stabilize."
Front-month WTI notched was up 25% on the day for a second straight session Thursday.
Dutch oil major Shell said Thursday that it is revising its second quarter production guidance to 1.75 million-2.25 million barrels of oil equivalent/d, down from previous forecasts of 2.71 million boe/d.
Involuntary production cuts from non-OPEC countries should not be underestimated, International Energy Agency executive director Faith Birol said Thursday.
"These reductions may well be similar to reductions that will be coming from OPEC+ throughout the year," Birol said on a press webinar for the launch of IEA'S Global Energy Review. "We are not yet there but we are seeing some [production cuts] already."
Starting May 1, the 23-country OPEC+ coalition is slated to cut output by 9.7 million b/d for two months. These countries will also cut 7.7 million b/d between July and December and 5.8 million b/d from January 2021 to April 2022.
Still, these cuts are insufficient to prevent a near term supply glut, analysts said.
US producers need to shut in over 3 million b/d of output over the next two to three months to offset demand declines stemming from the COVID-19 pandemic, according to S&P Global Platts Analytics.
As of Friday, US crude production is down by 1 million b/d from an all-time high 13.1 million b/d in late March, according to US Energy Information Administration data.
The US oil and gas rig count fell 59 to 432 during the week ended April 29 rig data provider Enverus said Thursday, as upstream players continued to idle oil rigs in response to sustained lower crude prices.
At the same time demand outlooks improved as more jurisdictions eased stay-at-home orders.
A reduced lockdown period and a strong economic recovery in the second half of 2020 could limit the annual decline in oil demand to 6.5 million b/d, or 6%, from 2019 levels, the IEA said, 30% below its central forecast of 9.3 million b/d for the year.
"From an oil market perspective, reopening may be grounds for hope, but we remain cautious," Kevin Book, ClearView Energy Partners managing director, said in a note. While a full rebound in demand is unlikely, "we cannot wholly discount the possibility that the tail end of 2Q 2020 might bring a demand surprise to the upside at the same time that supply rationalization is gathering steam," he added.
NYMEX refined product futures rallied into the settle on the last day of trading for the May contract. May RBOB settled up 2.51 cents at 75.23 cents/gal and May ULSD settled 7.52 cents higher at 76.97 cents/gal, regaining its traditional premium to RBOB for the first time since April 23.