What is oil's biggest monthly advance on record?
WTI gained 88% in May
Oil prices surged Friday despite rising tensions between the U.S. and China, securing their biggest monthly advance on record.
West Texas Intermediate crude oil, the U.S. benchmark, rallied 5.28 percent to $35.49 per barrel on Friday, and gained 88 percent for the month. That broke the commodity's previous record of 46 percent, set in September 1990.
“Demand is rising and production is falling, but China might be the fly in the oil market’s ointment,” wrote Phil Flynn, senior market analyst at the Price Futures Group. Rising tensions between the U.S. and China are causing the oil market to give up their “demand-inspired gains,” he added.
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All 50 states and Washington, D.C., have at least partially reopened after stay-at-home orders designed to slow the spread of COVID-19 removed about 30 million barrels of global oil demand a day.
Prices spiraled as a result of the lost sales, with the slide worsened by a price war between Russia and Saudi Arabia, two of the world’s largest producers, that led to both countries producing record supply.
WTI plunged below zero for the first time on record last month, causing investors not looking to take delivery to unload their positions at fire-sale prices.
An oil market that was “shocked by negative prices took historic steps” to regain its balance in May, Flynn told FOX Business. “We saw a major drop in global production, US rig count plunged by a record amount and OPEC+, inspired by President Trump, engineered the biggest oil production cut in history.”
The world’s largest producers agreed to remove 20 million barrels of daily production from the market, beginning on May 1, and Saudi Arabia deepened its agreed-upon output cuts by an additional 1 million barrels per day.
As a result, OPEC production plunged by 6.3 million barrels per day to 23.75 million, according to a report released overnight by JBC Energy. In addition, the U.S. oil rig count fell to a record low as drillers reduced output.
Now, demand is showing signs of coming back at a much faster pace than expected, according to Flynn.
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“All of this would suggest that the world is going to see the global oil oversupply start to disappear as long as we don’t take a big step back with another trade war,” Flynn wrote.