In the global market, about 1.9 million barrels of oil per day were loaded in autonomous mode in April, significant volumes of oil were blocked after a drop in demand within 3 months as a result of the isolation of the population caused by the COVID-19 virus, Mass Media says. According to estimates, this figure will probably increase to at least 2 million barrels per day in May.
Oil-bearing sands continue to be the main victim with 1.14 million bpd in April, followed by Iraq with about 300,000 bpd and Venezuela with 275,000 bpd.
"Upstream closures mainly include forced shutdowns at fields that have halted production due to low oil prices, COVID-19 outbreak or storage /sampling restrictions."
On average, analysts estimate a global suspension of production in the second quarter of 2020 - 1.88 million b/d.
"As storage facilities fill up, countries have to shut down production on a large scale to counteract a theoretical glut of 21 million barrels per day in the second quarter of 2020.
Stoppage of production is a very painful decision for an operator - economic support often maintains an operation of a well with losses for a certain period of time, rather than closing a project completely. But given infrastructure constraints, this is no longer an option for many landlocked producers”, senior oil market analyst from Rystad Energy Theodora Kau said.
According to recent press releases from Continental Resources and ConocoPhillips, 177,000 b/d volume drops are expected in several shale projects in May.
"The general uncertainty of oil demand and prices over the next few quarters makes operators refrain from suspending wells, as this means losing share in the regional market if they wind down earlier than their competitors.
General forecasts are as follows: Mohammad Sahimi, University of Southern California: "The slump in the price of West Texas intermediate (WTI) crude for delivery in May, which fell to a negative value, will unlikely happen to the June and July futures."
The recovery in demand can strengthen oil. It is expected in the second half of the year from countries that have begun to overcome the pandemic. But fair prices, analysts say, are the story of only 2021.
Emilio Jose Apud, Apud&Asociados: "Normalization and fair prices and volumes – a history 2021."
And the pace of market recovery directly depends on how long the quarantine measures will be in effect in the world. Oil prices will be the last to recover, as travel restrictions will obviously be the last to be lifted.
Van Cleef, economist at Abn Amro: «Oil prices will be the last to recover as border openings and travel alerts will get removed last."
Official Moscow called the fall in prices a part of an absolutely speculative moment, which should not be seen as an apocalyptic development. This is a purely trading moment, Dmitry Peskov said, explaining that it is a result of closing date of trading on futures for May.
Kremlin spokesman Dmitry Peskov: “It is a part of an "absolutely speculative moment, a purely trading moment."He explained that the crash was a result of fast-approaching "closing date of trading on futures for May."
