The Oil Price Collapse Is Already Over

Well, that was brief.

The collapse in the global oil price at the start of the Coronavirus crisis got many headlines, but its rapid increase as the recovery phase begins has not attracted so much attention.

Data revealed yesterday shows U.S. oil prices had their largest monthly gain in history in May, recovering a large portion of the losses accrued in March and April as a result of the Coronavirus lockdowns and the price war between Saudi Arabia and Russia.

For those two months, oil was sitting in tankers and refineries across the world unused, waiting for the lockdowns to end. Oil prices dropped into negative numbers for the first time. As a result, oil producers majorly slowed output. Now, with economic activity reviving as lockdowns end, the pent-up storage is ready to be deployed.

The American Petroleum Institute (API) estimated yesterday a small crude oil inventory draw of 483,000 barrels for the week ending May 29, far higher than the 3.038 million barrels analysts had predicted. That sent trading way up. By the end of the day the price of U.S. Brent crude was trading at $39.66.

The rapid return to ‘normal’ will be unwelcome news to climate campaigners, who had hoped the crisis would spur a major pivot on energy. Over the last two months, shares in renewable energy companies have soared. Experts predict that renewable power will still be the only energy source with growth this year.

But it remains to be seen whether investors will see the recovery in oil prices as a reason to rush back to ‘business as usual’ as global Coronavirus lockdowns end.