May 1 begins with a cut of 9.7 million barrels per day

Oil closed the session with broad gains. The price of WTI closed the trading session with an increase of 23.34 %, trading at $ 15.22 per barrel. Meanwhile, the cost of Brent increased by 11.78 %, trading at $ 22.87 per barrel. Upward pressures for the price of oil occurred due to two main factors:

The expectation that cuts in oil production by OPEC and its allies (OPEC +) may decrease the global hydrocarbon oversupply. On May 1, the decrease in oil supply by 9.7 million barrels officially began.

The Russian Minister of Energy, Alexander Novak, mentioned that Russia would reduce production by 19% compared to February levels. Mercuria’s Executive Director, Marco Dunand, said that the producers of the Permian Basin and from other parts of the United States would decrease their production by around two mbd.

Another factor is optimism in the market that consumption could resume gradually. The rate of infection from the Coronavirus has reduced in Europe and the US. It has led to speculation about the economic reopening of these regions in the following weeks.

Optimism regarding the demand for gasoline increased after the publication of the weekly report of the United States Energy Information Administration (EIA). According to the EIA, it observed an increase in demand for gasoline of 549 thousand barrels per day during the previous week. However, demand remains below 6 million barrels per day. Typically, the demand is usually between 9 and 10 mbd.

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Oil storage capacity is going to be saturated soon

However, despite the increase in the value, additional downward pressures for the price of oil are not ruled out. The latest available data shows that the United States is at 61% of its crude storage capacity, while, at the point of delivery, Cushing, Oklahoma, is at 81%. If this trend continues, the capacity to store crude oil in Cushing will be exhausted in the second week of May.

The Mexican export mix closed the session that ended on April 28, trading at $7.33 per barrel, which is equivalent to an increase of 11.91%.

Compared with March, the US oil production will drop by 2 million barrels a day in May. The coronavirus pandemic is going to have a lasting impact on consumer behavior, said the head of Energy Group.