Oil prices have temporarily pared yesterday’s losses following a five-session rally as the overwhelming supply glut has outweighed any recovering fuel demand. This has come amidst a restarting of OPEC+ production cuts and the reopening of economic activity in some states and countries. Saudi Arabia has led with OPEC+ cuts of 9.7 million barrels per day that had begun on May 1 with possible additional measures at the next upcoming meeting on June 10. Adding in the non-OPEC production cuts the total is likely nearing 15 million barrels per day and getting closer to the 20 million barrels per day announced at the initial OPEC/G20 meeting.

April may have been a bottom regarding demand with production cuts continuing to progress. Further OPEC action may be needed at the June meeting with the possibly of extending to the highest level of cuts at 9.7 million barrels per day for the rest of the year (instead of current plans to reduce cuts to 7.7 million barrels per day in July). Although negative territory is unlikely in the June contract, further weakness in the near term is suspected as the June contract heads closer to expiration due to limited cushing storage and inventories near full capacity as well physical delivery at the end of the month. In addition, oil volatility (OVX) remains highly elevated with the market remaining bearish trend with today’s range seen between 9.46 – 28.73.