Since the crude oil market crash after the onset of the pandemic and the Saudi Arabia and Russia price war, good news for crude oil markets has been lacking. Starting this week, however, there seems to be a small glimmer of hope on the horizon.
Crude Oil Markets Respond to Production Cuts
On Monday, May 11, Saudi Arabia and some of the other OPEC countries announced further production cuts to be implemented in June and lower than expected production this month. Aramco, Saudi Arabia’s state-owned oil giant, made known plans to cut crude oil production by an additional 1 million barrels per day (bpd) in June. This would put their June production at around 7.5 million bpd. That will put them at 4.8 million bpd down from their April levels.
West Texas Intermediate Going Up
These OPEC cuts along with an Energy Information Administration report citing a 700,000 barrel decline for last week brought West Texas Intermediate prices up. Tuesday saw a 8.7% increase and a price of $26.33 per barrel. It certainly helps that this past week also witnessed many European countries, and some states here at home, begin restarting their economies.
Tuesday, President Trump acknowledge the energy industry upturn in a tweet:
Crude Oil prices going up as Saudi Arabia cuts production levels. Our great Energy Companies, with millions of JOBS, are starting to look very good again. At the same time, gasoline prices at record lows (like a big Tax Cut). The BEST of all Worlds. “Transition To Greatness”
I’m not sure I count low gas prices as a “big tax cut,” but they are definitely low, especially compared with a year or even six months ago. And pump prices do tend to reflect the health of the economy. The energy industry is starting to see some hope, and likewise gas prices are still low but are slowly rising. The national average per gallon in April was $1.77. Right now, it is $1.86.
Crude Oil Markets are Seeing the Light
With this upturn, it is still unknown whether the energy industry will have any aid coming from the White House. Trump has mentioned the possibility of blocking any crude oil imports from Saudi Arabia as well as hoping to top off the Strategic Petroleum Reserve. Whether these things come to fruition or not, only time will tell. But at least there is a distinct light at the end of the tunnel, and this time, I don’t think it is an oncoming train.