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George Ma
May 6 10:33

Oil is finally growing, quarantine and production cuts have done their job

Crude oil rose in price as producers began to cut back production.
Oil market showed the fastest intra-day growth in more than nine months, as the decline in production had the desired effect: supply surpluses were declining just as countries began to gradually withdraw from quarantine anabiosis.

WTI oil prices rose by more than 80% over the week, while Brent broke through US$30 per barrel for the first time since April 15. OPEC and other oil producers began cutting production as part of a historic agreement, while American oil companies curtailed operations in the country's largest shale fields. Diamondback Energy Inc., Parsley Energy Inc. and Centennial Resource Development Inc. reported on Monday that they are suspending operations in the Perm basin.
The prices for the American grade of oil were tested at a minimum of US$10 per barrel last week. Since then, they have more than doubled. The discount on futures contracts with delivery in June compared to July has fallen to its lowest level in the last month. That means the panic around overproduction has begun to fade.
Morgan Stanley believes that the oversupply is likely to peak, although the market is likely to remain in surplus for several weeks. Stocks in China have already peaked, while in the US, Russia and Brazil car traffic is gradually increasing.
In addition, some markets are seeing a recovery in consumption after the collapse triggered by the coronavirus. US President Donald Trump tweeted on Tuesday that demand is rising and pushing prices up.
Nevertheless, the market continues to have a high surplus, with supplies from the Middle East reaching a peak last month at least since January 2017.
Saudi Arabia, Iraq, Kuwait and the United Arab Emirates, which account for about 70% of OPEC production, shipped an average of 18.9m barrels of oil in April. This is evidenced by tanker tracking data collected by Bloomberg. This is two million barrels more per day compared to the revised data for March.