Oil prices will not recover to pre-coronavirus levels as quickly as they fell, Head of Oil Markets at Rystad Energy Bjornar Tonhaugen said, Trend reports.
“As the crude markets are rebalancing now in June, according to our latest crude supply-demand balances, the focus in the markets now will shift to the speed of the recovery. How quickly demand will return will from now on be the key factor on how prices move,” said Tonhaugen.
The analyst noted that the new OPEC+ meeting is only two weeks away (9 June) and will be key to understand the pace of the recovery in oil prices in the second half of the year.
“The demand recovery is ongoing with increased pick-up in daily oil consumption indicators, especially on-road traffic. However, as Memorial Day marks the start of the “US driving season”, this year the uncertainty around the current travel patterns in the US is so great that the American Automobile Association did not release its Memorial Day travel forecast for the first time in 20 years,” said Tonhaugen.
The expert believes that the prices have reached a level that they will now keep for a while.
“Unless there is an unexpected demand indication that will move markets, the next milestone is June’s OPEC+ meeting. Developments there will determine how supply will follow up and everyone’s eyes are now set on that date. Most of the production that was to be shut is now already shut, and producers count down until the day they will be able to recover some of the output that’s put on ice. It is going to be a slow path to recovery though, as oil stocks on onshore and offshore storage also need to find willing buyers. Prices will not recover to pre-coronavirus levels as quickly as they fell,” Tonhaugen explained.
Last week’s tensions between the US and China have not yet produced any trade action from either side and fears have eased a little among traders, explaining the modest price gains this morning, added the expert.
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