By Ikenna Omeje
 
The Organization of Petroleum Exporting Countries (OPEC) Reference Basket (ORB), increased by $7.51 to $25.17 per barrel, averaging 42.5 percent in May.
According to the OPEC Monthly Oil Market Report for May, the recovery of prices was mainly because of the historic voluntary production cuts by Declaration of Cooperation (DoC) participating countries.
In April, the DoC participating countries, after two consecutive Ministerial Meetings, held on April 10 and 12, had agreed to supply cuts of 9.7 million barrels per day, which took effect on May 1.
In May, Brent rose by $5.78, or 21.7 percent, to average $32.41/b, and West Texas Intermediate (WTI) was up by $11.83, or 70.8 percent, to average $28.53/b. Year-to-date (y-t-d), Brent was $24.37 lower, a drop of 36.5 percent, at $42.38/b, while WTI was down by $21.47, or 37.0 percent, at $36.50/b, compared with the same period a year earlier.
The report said,” Spot crude oil prices rebound in May from the low levels registered in April as physical market fundamentals improved significantly over the month, following the demand shock evidenced in March and April. The oil market was strongly supported by a reduction of the global crude oil surplus, thanks mainly to the historic voluntary production adjustment agreement by OPEC and participating non-OPEC countries in the Declaration of Cooperation (DoC). In May, the OPEC Reference Basket (ORB) increased by $7.51 to $25.17/b, on average, up 42.5 percent.
“Crude oil futures prices bounced back in May amid renewed optimism on the global oil market outlook and expectations for a further recovery in oil demand as COVID-19-related lockdown measures were being lifted in many major economies. In May, ICE Brent rose by $5.78, or 21.7 percent, to average $32.41/b, and NYMEX WTI soared by $11.83, or 70.8 percent, to average $28.53/b. Year-to-date (y-t-d), ICE Brent was $24.37 lower, a drop of 36.5 percent, at $42.38/b, while NYMEX WTI was down by $21.47, or 37.0 percent, at $36.50/b, compared with the same period a year earlier. DME Oman crude oil futures prices rose m-o-m by $9.77 in May, or 40.8 percent, to settle at $33.69/b. Y-t-d, DME Oman was lower by $24.56, or 36.9 percent, at $41.96/b.”
On crude price movement, it said: “Crude differentials for almost all crude qualities strengthened in May, buoyed by lower June loading programmes in the Middle East, West Africa, Mediterranean, and Northwest Europe, as well as lower crude supply from the US. North Sea crude differentials increased from last month’s lows, supported by healthy regional demand and the lower availability of similar grades in the Mediterranean, West Africa, and Russia as the participating countries in the DoC implemented the considerable production adjustments on 1 May. Mediterranean and West African crude differentials also strengthened and most medium and light sweet grades rose to a premium against North Sea Dated amid lower availability for June loading. The Middle East sour grades also rose firmly in May on expectations of a tightening sour market and a return of demand from Asian refiners, particularly in China and OECD countries, like Japan.”
The report showed that global oil demand is “projected to decrease by 9.1 mb/d in 2020, unchanged from the previous month’s assessment. The COVID-19 pandemic has negatively affected global economic activities, eliminating global oil demand growth potential and leading to a y-o-y decline of 6.4 mb/d in 1Q20 and by 17.3 mb/d y-o-y in 2Q20.” It added that “Transportation fuels are projected to be under pressure during 2020 as lockdowns in various countries particularly the US, Europe, India and the Middle East reduce demand for gasoline and jet fuel, as air travel and distances travels have been anticipated to significantly decline compared with a year earlier.”
Also during the month under review, refinery margins globally experienced heavy pressure and dropped to record lows on the back of oil product gluts amid stronger feedstock prices. The middle section of the barrel suffered the most as the manufacturing, freight and distribution systems still operate at reduced rates.