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  • West Texas Intermediate crude bulls back in control. 
  • The market should soon return to deficit conditions – TDS

West Texas Intermediate crude is currently trading at $26.45bbls having travelled between a low of $23.40 and a high of $26.62 on the day so far. For June delivery on the New York Mercantile Exchange, WTI climbed $4.17, or 20.5%, to settle at $24.56 a barrel, adding to Monday’s  3.1% gain. 

Traders are expecting a pick-up in demand as lockdown measures ease with nations seeking to get their economies going after several weeks of stagnant activity. The risk sentiment was flowing which also helped to lift equities around the globe, propping up oil prices.

Output cuts are taking effect

Meanwhile, output cuts are taking effect which also helps to keep prices in recovery mode. Not only has the Organization of the Petroleum Exporting Countries and allies, (OPEC+) agreed to reduce output by 9.7 million barrels a day in May and June, which officially began on May 1st, additional oil companies also announced plans for voluntary output reductions.

“In combination with large OPEC+ cuts, we estimate that market-driven declines and a gradual normalization in demand will translate into a great rebalancing,” analysts at TD Securities (TDS) explained, adding:

 “As the year progresses beyond June with some 8m bpd worth of OPEC+ cuts, as much as 4m bpd worth of market-driven declines (which could include more than 2m bpd declines from the US as signalled by recent earnings releases), the market should soon return to deficit conditions. As a result, the extreme contangos observed in recent history should begin to ease. CTAs remain positioned for further downside, and we do not expect significant flow from this group of participants.”

WTI levels