- Oil Production Cuts
- Easing COVID-19 Lockdown Restrictions
- Coronavirus Re-infection Concerns
Oil prices were up by 6.8% as production cutbacks at the back of improving demand lifted traders sentiments in the battered energy industry. U.S crude futures clocked highs of $26.07 a barrel as Saudi Arabia announced it is planning to cut June production by 1 million barrels to 7.5 million. The United Arab Emirates and Kuwait confirming plans to cut June oil production by 180,000 barrel collectively also helped support oil prices.
Surging Oil Demand
A spike in oil products demand as countries continue to ease lockdown restrictions is another development that continues to offer support to oil prices . The easing of lockdown restrictions has seen an increase in people using cars as well as heavy machinery in key sectors, expected to lead to a further increase in demand.
Oil prices have remained subdued near all-time lows on low demand around the world at the backdrop of a glut in supply in the market.
Coronavirus Infections Concerns
Oil prices were down in early Wednesday trading session as traders reacted to concerns over a second wave of infections. A spike in U.S crude inventories also continues to fuel sell-off in the oil markets. Oil prices initially dropped from $25.73 a barrel to $25.25 a barrel, waiting to see if the bearish wave will persist.
Standing in the way of oil prices increasing even further is the risk of a second wave of coronavirus infections. While countries are increasingly easing lockdown restrictions, a second wave of infections could trigger renewed movement restrictions which could hurt demand even further.
Infectious Disease Expert, DR. Anthony Fauci, has already warned that easing lockdown restrictions in the U.S could set off new outbreaks of coronavirus infections. South Korea and China are already grappling with a second wave infections barely weeks after re-opening some of the badly hit cities.
With coronavirus lockdowns expected to hurt demand, oil producing majors may have to initiate bigger production cuts in order to stabilize oil prices. Saudi Arabia is pushing OPEC countries to initiate drastic cuts