Phil Flynn, The Energy Report
- The crude oil market is having its best month percentage wise in history as we start to unlock the global economy. Oil demand is coming back faster than expected, and the International Energy Agency (IEA) is saying it believes that global oil demand will be higher than it was before the coronavirus shutdown happened. Reuters is reporting that the Russian energy minister, Alexander Novak, is predicting that the global oil market will be in balance in the next two months. Early reports show strong Russian compliance to cuts come as OPEC implements the biggest global production cut ever.
- U.S. energy producers continue to cut back, and there are expectations of a wave of shale bankruptcies. Marketwatch reports that Baker Hughes BKR, -0.78% on Friday said that the number of active U.S. rigs drilling for oil dropped by 21 to 237 this week. The oil-rig count has now fallen for ten weeks in a row, implying future declines in domestic crude output.
- I agree that oil demand is on track to exceed pre-coronavirus levels and that the theory of peak oil demand is as flawed as the peak oil craze was 20 years ago. Oil prices have come a long way since sub-zero pricing. What we are witnessing is one of the quickest global oil supply and demand rebalancing ever. While we may see some weaknesses, the trend is higher, and the market is looking ahead where surging demand and plunging production could create a buying squeeze.
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