- Oil prices experienced a wild ride in recent months as a global price-war and a slide to negative levels shook the market.
- The world’s most-traded commodity has mostly rebounded in May from its late-April lows, but traders still fear a prolonged demand pressure fuelled by the coronavirus.
- Here’s a timeline of key events in the recovering oil market, from the start of the worldwide price conflict to its latest upswing.
- Watch oil trade live here.
Over the last two months, oil prices surged, slipped, and briefly hit negative levels amid the coronavirus pandemic and growing global tensions.
The world’s most-traded commodity is hot off several historic price moves and soaring back to its highest levels since early March. Volatility in the oil market contributed to major stock sell-offs through March and April after the pandemic already drove wild price swings. With major economies unwinding lockdowns and oil demand slowly returning to the market, one of the commodity’s most turbulent periods has seemingly come to a close.
Here’s a timeline of key events in the recovering market, from the spark of a global price war to oil’s latest rally.
The price war begins
March 6: What was supposed to be a relatively calm OPEC+ meeting turned south after Russia refused to meet Saudi Arabia’s request for output cuts. Oil demand had slumped to historic lows amid the coronavirus and its effect on global travel. The world’s biggest producers aimed to cut supply to prop up prices, but Russia’s move sparked a global race to steal market share.
The refusal prompted oil prices to tumble 11% that Friday, a hint of the chaos to come. The weekend brought escalation from Saudi Arabia, with the kingdom cutting its official selling price by the most in roughly two decades. Oil futures tanked 31% when trading began on Sunday, March 8, the commodity’s biggest single-day decline since the Gulf War in 1991.
March 10: Saudi Arabia and Russia doubled down on the price war the following Tuesday. The former announced it would boost production to a record 12.3 million barrels per day starting in April, flooding the market with cheap inventory.
Russia fired back within minutes by lifting its planned output by 500,000 barrels per day. The country’s leadership didn’t shy away from a near-term deal. Energy Minister Alexander Novak said on March 10 that “the door isn’t closed” to talks at the next OPEC+ meeting, and that new agreements could still be reached.
The US slashes production
April 7: The US issued a key booster to the ailing market in early April with the Energy Information Administration announcing it would decrease its forecasted oil output through 2021. The slashed forecast arrived days before a critical OPEC+ meeting and revealed the US’s plan to lift the commodity’s price until the virus threat faded and demand could stage a comeback.
The April OPEC deal
April 12: Oil prices slumped through March as demand failed to rebound, inventories swelled, and smaller producers entered the price conflict. A truce finally arrived in mid-April when OPEC+ agreed to cut global production by nearly 10%. Oil eked out minor gains through the session, but the deal marked a turning point in the price war and showed new cooperation in shoring up demand in the beleaguered market.
April’s plunge below zero
April 20: Oil slowly declined in the days after the OPEC+ deal as investors shifted focus from weak demand to a dwindling level of storage. The market faced its darkest day on April 20, when near-term expiration for May WTI futures slipped as much as 321% to -$US40.32 per barrel. The plunge marked the first time oil contracts reached negative prices.
Traders rushed to offload contracts hours before expiration, unsure who would be willing to store the market excess until demand recovered.
The single-day slip pushed WTI prices into contango, meaning oil futures were more expensive than spot prices. The dynamic “tells us nobody in America wants the oil in the short-term,” Jeffrey Halley, senior market analyst at OANDA, said then.
June contracts’ tough start
April 21: The following session saw May contracts expire at $US10.01 per barrel and shifted attention toward June futures. The new WTI contracts tumbled as much as 68% to $US6.50 per barrel during the session as fears of a storage crisis lingered.
Brent crude, oil’s international benchmark, sank 23% to $US19.80. Investors remained unconvinced that OPEC’s production cuts could offset stifled demand and a lack of tanks.
“Oil prices are at these low levels because of a complete stoppage to demand,” Carl Larry, performance director at Refinitiv, said. “We’re not dealing with demand destruction at this point, we’re facing demand disappearance.”
Bumps on the upswing
April 27: While prices stabilised after the April 20 drop and turned higher as more producers slowed pumping activity, the market’s uptrend wasn’t without its own turbulence. WTI contracts sank another 21% on April 27 as more authorities warned of a storage shock and a similar negative-price move for June contracts.
Industry giant BP fanned the flames as well. The producer reported a 66% decline in first-quarter profits, citing coronavirus fallout and a lack of oil demand for its faltering performance.
“Our industry has been hit by supply and demand shocks on a scale never seen before,” Bernard Looney, BP CEO, said in a statement.
The late-April decline marked the last of oil’s precipitous downturns before it staged a steady rally in May. As pumping slowed further and China eased lockdowns, traders began to see a light at the end of oil’s tumultuous two months.
Storage crisis averted
May 20: Oil climbed throughout May as production cuts and reopenings alleviated storage and demand concerns around the globe. The commodity staged a six-day rally through the week ended May 22, bolstered by data showing US crude inventories falling the previous week. Traders also cheered signs that OPEC members had complied with their effort to slash nearly 10 million barrels from daily production.
Concerns around a greater recovery in global demand remain. Most experts view the coronavirus pandemic as the greatest downward pressure on prices. Until economies can fully reopen and key industries return to normal activity, the commodity will likely sit well below the $US60 per barrel threshold it topped at the start of the year.
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