— This is the script of CNBC's news report for China's CCTV on June 4, 2020, Thursday.
After the price of Brent oil broke through the $40/barrel level shortly, we saw that the oil price soon fell back. Oil prices have been a bit volatile in recent days as investors keep a close eye on the upcoming OPEC + meeting and any cuts in output to be discussed.
OPEC + decided at its April meeting to cut production by 9.7m barrels a day, or about 10 per cent of global output, from May to the end of June, before cutting it to 7.7m b/d between July and the end of the year. A meeting of OPEC +, scheduled for June 9-10, could be moved up to Thursday, which has given recent oil prices a boost. Reuters, citing sources familiar with the matter, said the latest report that an earlier meeting is less likely. The person also said Saudi and Russia had reached a tentative agreement to extend the current record output cut by one month, which is shorter by previously expected. Some had thought the current scale of production cuts were likely to be extended further into September. In addition to the timing of the cut, OPEC + is likely to focus on implementation, Saudi Arabia is said to be responsible for most of the cuts, while Iraq and Nigeria have not fully fulfilled their commitments. In addition, Saudi Arabia, United Arab Emirates and Kuwait may also cancel their additional voluntary increase in production cuts.
Oil prices rebounded sharply in May, helped by production cuts from OPEC + and other producers and a marked recovery in demand from some economies, including China.
Brent prices rose nearly 40 per cent in May, while US WTI prices rose almost 90 per cent, their biggest monthly gain since 1983.
So after Brent briefly broke $40/barrel, the next question is, can international oil prices stabilize this year? But for this issue, there are plenty of skeptics. Especially regarding the WTI price.
The average price for U.S. WTI crude this year is $32.78 a barrel, compared with $37.58 for Brent, according to 43 analysts recently polled by Reuters.
CEO of Pioneer Natural Resources
we're really gonna need $45 WTI or $50 Brent before you see increased activity as a result of that we are we are gonna see a significant drop in US production going into 21
Further upside requires substantial improvement in the US economy and mitigation of other downside risks to the world economy. If OPEC + confirms an agreement to extend production cuts, the key to a recovery in oil prices will be on the demand side. A new source of pressure in the U.S. is the possibility that protests could lead to travel restrictions that could depress gasoline demand.
Any surprise at OPEC +would weigh heavily on prices. We will keep an eye on this issue.