US Oil Price May Rally After March

Since its last peak of US$63.27/ barrel on January 6th, US oil price has been down 68% so far, breaking the record in losing almost 50% in March.

Bank of America noted that global oil demand can drop an unprecedented 12% in the second quarter, while Russia say WTI Crude Oil may rebound to US$60/ barrel if US shale leaves the market. The current price of less than US$25/barrel is lower than the breakevenprices of US shale produces ranging from US$39-48.

Oil producers have once survived the crisis during 2014-2016 by reducing their operational costs, but as theyre facing an unprecedented decline in demand due to global pandemic, they have even more limited rooms to cut the breakeven prices.

Meanwhile, market has shown signs of bottoming out. Statistics show US consumer confidence is getting steady. Larry Fink, CEO of global top asset management firm BlackRock said there will be “great opportunities” once the global economy recover from the public health crisis;although the pandemic has been a heavy blow, he believed that global central banks are swiftly taking measures to tackle challenges of credit market and implementing fiscal stimulus to eventually revive the global economy.

WikiFX estimates that crude oil price will return to fair level eventually.