World crude prices have staged a modest recovery from last month's dizzying collapse, prompting analysts to ponder whether the worst of the 2020 oil crisis is over.
The commodity tanked for the primary time into negative territory in April, suffering from demand-destroying coronavirus, chronic oversupply and a Saudi-Russian price competition .
West Texas Intermediate crude hit a historic low of minus $40.32 per barrel on April 20 as sellers were forced to pay to dump the May contract amid scarce storage capacity. Brent North Sea oil then dived as low as $15.98 on April 22 but didn't turn negative.
Fast forward one month, however, and both oil prices are currently trading at around $35 per barrel.
Phoenix from ashes?
"Like a phoenix from the ashes... oil prices have recovered significantly from their lows in April," said Commerzbank analyst Eugen Weinberg.
Behind the recovery is an easing global supply glut, and nations starting to relax lockdown restrictions that have crippled oil-intensive sectors like transport and manufacturing.
Yet some analysts warn that the market remains susceptible to a much-feared second wave of coronavirus infections -- and lockdowns.
The deadly pandemic has thus far killed 328,000 people worldwide and infected quite five million, consistent with an AFP tally.
"What about rock bottom in oil prices: is it behind us or before us?" asked Rystad Energy analyst Bjornar Tonhaugen.
"After the newest shut-ins and therefore the news that more production are going to be cut within the Middle East , we now see an increased possibility that prices have already reached rock bottom -- unless a second lockdown wave comes.”
Prices went into freefall in April because the deadly COVID-19 outbreak slammed the brakes on the planet economy -- and sent energy demand off a cliff.
At the peak of the market meltdown, the planet was awash with crude, with storage stretched almost to full capacity both onshore and offshore.
However, the most US oil depot in Cushing, Oklahoma wasn't overwhelmed at any point.
In an effort to defend oil prices and rebalance the oil market, the OPEC+ alliance of major producers led by Riyadh and Moscow agreed in April to slash daily crude production by 9.7 million bpd over two months.
The us , which is that the world's biggest oil producer, has meanwhile curbed the pace of costly oil extraction -- which is unprofitable in times of ultra-low prices.
"Oil demand has bottomed out and oil supply from OPEC+ and North America is falling sharply," added Weinberg.
"The oil market is thus not as oversupplied as feared.
"Rising demand and therefore the massive production cuts are likely to cause a substantial supply deficit within the last half of the year. The sharply increased inventories should then fall noticeably.”
The International Energy Agency (IEA) has forecast that global oil demand will fall by a record amount this year on coronavirus -- but also added that the worst could now be over.
OPEC predicted last week that the rebalancing of the oil market would accelerate over subsequent few quarters.
In a further twist, the WTI front-month contract switched in the week from May to June -- and therefore the move didn't spark an equivalent havoc as last month.
Yet traders caution that demand will remain fragile, set against the backdrop of a widely forecast global deep economic downturn sparked by coronavirus.
"Oil demand is on the trail to a gradual-but-fragile recovery," said PVM analyst Stephen Brennock.