If It’s a V-Shaped Recovery, What About Oil Prices?

Crude demand is making a V-shaped recovery, as the global economy does. It’s difficult to forecast ultimate demand for mobility fuel in a post-virus world, but preference for single-passenger transit could offset preference for working from home. OPEC+ appears to have learned a lesson from its March price war, turning now to disciplined compliance with production quotas. Petroleum stocks are even higher than in the 2016 crisis, and the cartel understands they must be drawn down to restore pricing power. US fracking is coming back, with wells that had been capped in the crisis more productive than before. Official forecasts show little production growth, but at the pace so far, recovery could be complete by the end of 2021. If OPEC+ is serious about maintaining production discipline, the path of least resistance for oil prices is higher.