Oil prices rising amid improved market outlook
Chart shows third-month Brent contract minus front month
Crude prices are rising in May amid OPEC production cuts and voluntary curbs of other producers. The spread between third month and front month Brent prices has narrowed and is approaching backwardation (see chart above), suggesting a near-term glut in the market is ending. The International Energy Agency (IEA) revised its forecast of average fall in oil demand for 2020 to 8.6mil bbl/day, up from the decline of 9.3mil bbl/day predicted last month. China’s refinery crude throughput rose 0.8% YoY in April (Platts) while Indian crude imports gained 5% MoM (ICIS), pointing to a gradual recovery of demand. US oil inventories dropped 5mil bbls last week and output plunged to a 19-month low of 11.5mil bbl/day (EIA). Improving demand and easing supply for energy products across the globe could continue to support crude prices.