Despite fears of a second wave of COVID-19, oil markets rebounded last week, showing signs of improving fundamentals as global supplies continue to tighten. On Friday, Brent closed at $42.19, up by 8.20 percent w/w, while WTI closed at $39.75, up by 9.03 percent w/w. Furthermore, the 1-2 month Brent spread flipped into backwardation for the first time since the third of March which is a major sign of tightening supplies resulting from OPEC+ cuts.
Yet, it is expected that 500 thousand bbl/d of shale oil, mainly from the Permian, will come back online by the end of June as a result of the price recovery. Oil demand is currently said to stand close to 90 million bbl/d, 5 million bbl/d above our earlier forecast. U.S. oil inventories rose by 1.7 million barrels w/w according to the EIA’s latest figures, while U.S. oil production stands at 10.5 million bbl/d, down by 1.7 million bbl/d y/y. U.S. oil rigs saw a 15th consecutive week of decline, dropping by 10 rigs to bring the total number of rigs to 189. There are plenty of positive signs for oil markets, with the return of economic activity around the world. The manufacturing PMI rose to 43.1 in May from 41.5 in April 2020.
Union Jack Oil plc (LON:UJO) is an onshore oil and gas exploration company with a focus on drilling, development and investment opportunities in the United Kingdom hydrocarbon sector.
