Saudi Arabia: Oil prices recover slightly in April
Oil prices recovered moderately over the past month, as OPEC+ members agreed to cut production by an unprecedented level in mid-April, amid Covid-19 lockdown measures decimating oil demand prospects. On 8 May, the OPEC oil basket traded at USD 22.91 per barrel, marking an 8.1% increase from the same day in April. That being said, the price was 67.2% lower than on the same day in 2019 and down 66.3% from the start of the year.
Price gains in recent weeks were mainly attributed to the newly agreed OPEC+ production cuts coming into effect at the start of May. The deal was signed on 12 April, and OPEC and its allies plan to cut output by roughly 9.7 million barrels per day (mbpd)—approximately 10% of global supply—in May and June this year, before gradually reducing curtailment measures thereafter until April 2022. The unprecedented cut to production should help to somewhat balance out oil markets amid extinguished demand. Furthermore, prices also received a slight boost in recent days as some countries have started to ease lockdown measures, which should be helping to prop up depressed demand.
Looking ahead, crude oil prices are expected to remain extremely low this year, despite the recent OPEC+ deal, as lockdown measures undercut demand prospects and create a supply glut in global oil markets. Nevertheless, a quicker-than-expected rebound in global economic activity as countries continue to ease lockdown measures should support a gradual and tepid rise in oil prices.
In terms of production, combined crude oil output among OPEC members increased from 27.8 mbpd in February to 28.6 mbpd in March, mostly reflecting higher output from Saudi Arabia and the UAE. Saudi output increased from 9.67 mbpd in February to 10.06 mbpd in March.