On April 20, the day before the delivery date of WTI crude oil futures may contract, the contract price in May fell to a negative value, once as low as - 40 USD / barrel, which was the first time in history. At that time, most parts of the world were still under embargo, and crude oil storage space was in an emergency. Investors worried that there would not be enough space to store crude oil in the future, so they scrambled to get rid of the contract at hand, which led to this surprising negative oil price.
After this negative oil price, the oil price began to rebound against the background of the gradual recovery of global demand, and the exchanges risk warning to investors also led to the decline of speculative positions in the crude oil market. In addition, the Chicago Mercantile Exchange (CME) announced on May 13 that it increased the margin of WTI crude oil futures June contract by 20% to $12000 / hand contract (previously $10000 / hand contract), which raised the capital threshold for investors to trade crude oil. Meanwhile, CME also reminded investors to arrange a reasonable time to move their positions and change months in advance.
The key to boosting oil prices is that the global epidemic has slowed down in the past month. The resumption of production has gradually restored the demand for crude oil, and crude oil suppliers have begun to reduce production to support market prices. Analysts said this renewed investor confidence in oil prices.
OPEC + has cut production by 9.7 million barrels per day since May 1, and Saudi Arabia, Kuwait and the United Arab Emirates all said they would voluntarily further reduce production. Saudi Arabia has offered to increase production by an additional 1 million barrels per day since June.
Baker Hughes, an oil field service provider, reported on Friday that the number of active oil rigs in the United States fell 34 in the week to 258, the second consecutive week to a record low.
Paola masiu, an oil analyst at rystad energy, said: low demand and desperate low prices are causing crude producers to reduce crude production significantly, faster and deeper than expected. And as global crude oil demand increases, oil prices are slowly recovering.
Although a better outlook for crude oil demand has led to a third week of gains in oil prices, it is still well below the January high of $60. Therefore, some people are not optimistic about the subsequent rebound of the oil market. Paul Sankey, crude oil analyst at Mizuho bank, said: although there is optimism in the market at present, the outlook for crude oil is still very unstable. After the peak demand of last year, the crude oil market has now fallen to the freezing point. During the epidemic period, the crude oil consumption behavior has also changed dramatically. The sharp decline in demand has also interrupted the cash flow of many small and medium-sized oil companies and made it difficult to repay their debts. It is expected that the bankruptcy application of oil companies will increase further.
Henning gloystein, an analyst at Eurasia Group, also pointed out: after the outbreak of the virus, it has had an unprecedented impact on the oil consumption market, and after using various countermeasures, the turnaround of the epidemic has also brought a turning point to the crude oil market. However, once the oil price rises to a certain extent, it will also stimulate some oil producers to start to re exploit the crude oil. To maintain the rise of oil price, the crude oil producers must keep reducing production until 2021, otherwise, the rise of oil price is only a flash in the pan.