US futures plunged below zero in April due to Covid-19’s destruction of demand and a US-Saudi price war. Yet oil then staged an 88% rally during May.
Slowly reopening economies and the recent producers’ deal to cut output by ten million barrels per day in May and June – a deal that this week looked set to be extended – have stabilised the market. Brent crude continued its rally early this week, eclipsing $40 a barrel.
The recovery still leaves the industry and the countries that depend on it in a difficult spot, says Ed Clowes in The Daily Telegraph. Many US shale drillers need prices above $50 to survive. Distressed debt in North American energy tops $190bn. Saudi Arabia has been forced to bring in tough austerity measures to balance the books, slashing benefits and effectively tripling VAT. Lower prices saw Russian GDP contract by 28% in April. Closer to home, some analysts warn that the shakeout could “accelerate the death of the North Sea”, where fields are becoming uneconomical.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The pandemic has also eclipsed the oil market’s usual geopolitical worries, says Samuel Burman of Capital Economics. So great has the demand destruction been that even if Iran blocked the crucial Strait of Hormuz shipping route there would be little impact on prices; many Middle Eastern states are cutting back exports anyway.
The most bullish analysts think the supply glut could end in weeks, writes Ellen Wald for Barron’s. Yet economic reopening is just the first stage on the path to more normal demand for the word’s favourite commodity. Fear of the virus remains widespread, meaning many are still avoiding travel and leisure. The market must also contend with the scarring effects of a deep recession. The journey back to pre-crisis levels of oil demand will be a long one.
-
M&S and Tesco among those warning of a £7bn Budget hitSeventy-nine UK retailers have written to Chancellor Rachel Reeves about possible price rises and job cuts - here is what it means
-
How much does it cost to move home under the Labour government?Home-moving costs are rising and could get more expensive once stamp duty thresholds drop in April 2025
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
Best investing appsLooking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go? We round up the best investing apps
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
