The outlook for global oil markets has “improved somewhat,” with demand a little stronger than expected and supply reined in by a brutal price crash, the International Energy Agency said.
World oil production is on track for a “historic decline” this month to the lowest level in nine years, the IEA said in a monthly report. OPEC and its partners are slashing output, while others like the U.S. are forced to scale back drilling. “It is on the supply side where market forces have demonstrated their power and shown that the pain of lower prices affects all producers,” said the Paris-based agency, which advises major economies. “We are seeing massive cuts in output from countries outside the OPEC+ agreement and faster than expected.”
It’s a stark shift in tone from last month, dubbed “Black April” by the agency’s chief, when the IEA warned that cutbacks by OPEC+ probably weren’t enough to prevent the world’s storage tanks being overwhelmed by the middle of the year.
Demand Shock
The oil market is still in a very difficult position. International crude prices have collapsed by more than 50% since the start of the year as the coronavirus lockdowns ground flights, empty roads and shutter businesses. Yet the current price of about $30 a barrel in London is $10 above April’s lows.