All eyes have been on the oil industry amid COVID-19 and the pounding the industry has taken as a result of stay at home orders and decreased demand for oil. While rig counts are historically low and thousands who work in the industry are currently furloughed, somehow the oil market has closed out the quarter in good standing.
Oil Closes the Quarter in Good Shape Despite Global Pandemic
2020 has been a bumpy year for the oil market, as history was being made in April for negative oil prices. Yet, somehow the oil market finished in the green and posted its best quarter in almost 30 years in June. The industry is currently trying to hold steady right about the $40 a barrel mark as the strains of COVID-19 still impact supply and demand. The year has had unprecedented challenges including a global pandemic and a supply glut.
In April, the future of the oil industry was looking very dark. Yet, New York futures surged 92% through June 30th thanks in large part to the OPEC+ production cuts along with China manufacturing coming back and their oil consumption rising.
Phil Flynn, an analyst at Price Futures Group Inc. said, “It’s not going to jump back up to $60 overnight, but to get where we are now from where we were at is an incredible story,”. He went on to say, “Coming out of the rut will have to happen one day at a time.” While the quarter finished well, the market has not made a complete recovery and the speed of the recovery is uncertain. Demand is growing, with many countries and regions returning to near pre-COVID demand, but the demand is still far from pre-crisis levels of oil use.
The current spike in COVID-19 cases in the United States is causing states to halt or roll back re-openings, which will likely impact summer travel plans and fuel consumption. Another concern is growing crude stockpiles that have continued to grow over the last three months. ConocoPhillips said on June 30 that it plans to restart some wells that they had closed after the oil market crash. What will the implications of an oversupply have on the market overall? Only time will tell.
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