— This is the script of CNBC's news report for China's CCTV on May 15, 2020, Friday.
The immediate cause of Thursday's higher oil prices came in the latest report from the international energy agency, released Friday. In its report, the international energy agency says global oil demand is set to record the biggest drop on record this year. But the lockdown has eased in several economies around the world, so the decline in demand will be better than previously estimated.
The international energy agency expects global oil demand to fall 21.5 million barrels a day in May from a year earlier.
But as the demand side picks up, international crude oil demand is expected to shrink to 8.6 million barrels a day for the full year from 9.3 million barrels a day, and international crude oil inventories are expected to shrink by 5.5 million barrels a day by the second half of the year.
Moreover, global crude oil supplies are expected to hit their lowest level in nine years in May as oil companies voluntarily or passively cut production.
In addition to the IEA report, data released the day before by the U.S. energy information administration showed that Us crude inventories unexpectedly fell for the first time after rising for 15 straight weeks. All this has eased some of the pressure on oversupply and tight inventory space.
The rebalancing of supply and demand has led investment bank Goldman sachs to shift its stance and start sending positive signals. A month ago, Goldman Sachs also warned that WTI oil prices would fall to $20 per barrel. But Goldman Sachs Global Commodity Research Director pointed out in a recent interview with CNBC on Thursday that oil prices have bottomed out and expects WTI oil prices to rise to $65/barrel next year.
Jeffrey Currie, Goldman Sachs, Global Head of Commodities Research
the market appears to have already turned the corner, we are in the inflection right now
Our target for the second half next year is $65/b with potential to spike to 70
However, the current trend of international oil prices still faces some uncertainties. One is the possibility of a second wave as blockades are eased in many places, according to the IEA. The other is whether countries that have already announced production cuts will be able to follow through on their commitments, as in the past there have been cases where oil producers have promised to cut output but actually increased output.
However, due to the recent decline in oil prices and the sharp decline in the income of oil-producing countries in the Middle East, some international rating agencies, including Fitch and Moody's, have adjusted their ratings or outlook for the Middle East. It will also put pressure on oil producers to balance the market.
Recently, Saudi Arabia, Kuwait and Iraq have announced additional production cuts. In addition, Saudi Arabia plans to cut the amount of crude it sends to at least three Asian countries by 10-30% in June, according to a new report. In the United States, although recent data are improving, according to ship tracking data compiled by Bloomberg, more than 30 oil tankers carrying Saudi oil will arrive in the US Gulf Coast and West Coast between May and June. These more than 50 million barrels of Saudi crude oil may threaten positive progress in the US oil supply. The next question, then, is whether the June WTI contract, which expires on May 19, could be as negative as the May contract.
International energy agency Executive director
given the fact that we see the signs of recovery in the oil demand and the production cuts coming from the OPEC plus and the gas from the U.S. and others, the see the risks of seeing mindless prices much less than we have in after I would say.
Even so, the commodity futures trading commission has warned traders and market participants to be aware of the potential great volatility in the trading days leading up to the expiration of contracts. We will keep an eye on this issue.