On Thursday, May 21, US WTI crude oil futures market rose, with the settlement price of major contracts rising by $0.43, to $33.92/ barrel. Brent crude oil futures market rose, with the settlement price of main contracts at US $36.06/ barrel, or up $0.41. This was also the sixth day for crude oil to continue to rebound, and WTI has reached a high since March 10. The main reason is that the production reduction has suppressed the contradiction between supply and demand in the oil market under the pressure of the epidemic of COVID-19.

Since the historic agreement was reached, OPEC+ has officially put into production reduction process since May, and OPEC+ member countries led by Saudi Arabia and Russia have implemented large-scale production reduction. According to the agreement, the share of production reduction from May to June 2020 will be 9.7 million barrels/ day. And some production countries led by Saudi Arabia have also committed to further deepen the production reduction from June. Saudi Arabia said that in June, it will unilaterally reduce production by an additional 1 million barrels/ day. In addition, Kuwait and the United Arab Emirates will also reduce production by an additional 80,000 barrels/ day and 100,000 barrels/ day respectively in June. OPEC crude oil production is expected to fall below 20 million barrels/ day by June. In addition, as far as the recent market news is concerned, Russia is also actively cooperating with the production reduction as soon as it changes its previous negative attitude towards production reduction. According to the source, Russia is close to completing the quota in the new round of production reduction. That is to say, Russia promised to cut its daily production from the benchmark in February to 8.5 million barrels in May June, with a reduction of 2 million barrels/ day. Therefore, it can be inferred that the OPEC+ oil production alliance led by Saudi Arabia and Russia may cut production more than the previously set volume of 9.7 million barrels/ day in May, which largely eased the pressure on the supply side of the market.

In addition to OPEC+ in accordance with the production reduction agreement, the production of US shale oil is also declining, except that the former is active, while the latter is passive. Due to the low oil price hitting the shale oil industry in the United States, many oil companies also fell one after another. According to bankruptcy Data shows that by the end of April, in addition to whiting oil, a well-known US shale oil company that had previously filed for bankruptcy, at least five large oil and gas companies had fallen in less than a month, and even more seriously, shale oil investment had fallen to the freezing point. According to the Houston Chronicle, the number of rigs in the United States is now 62% lower than a year ago, and the number of active rigs is now equivalent to 10 Years ago (2009). U.S. crude oil production also fell sharply. Data show that on March 13, US crude oil production was 13.1 million barrels/ day, and as of May 8, US crude oil production fell by 1.5 million barrels/ day, to 11.6 million barrels/ day, and IHS Markit expects US oil producers to suspend production of 1.75 million barrels/ day by June. Shale oil production in the United States is also declining at a rate visible to the naked eye.

Moreover, the depletion of oil reserves is easing; with US crude oil inventories (excluding strategic oil reserves) falling by 4.982 million barrels in the week ended May 15, according to the EIA. This is also the last 16 weeks, the United States crude oil inventory for two consecutive weeks decreased. In addition, the inventory of Cushing crude oil also decreased significantly. In the week of May 15, the inventory of Cushing crude oil decreased by 5.587 million barrels. The inventory of Cushing crude oil also decreased for the second consecutive week in nearly 10 weeks. The reduction of production and the decline of crude oil inventory have greatly eased the worries about accumulation of crude oil.

From the demand side, although the current overseas epidemic situation is still severe, and the number of confirmed cases in some countries is still high, more and more countries restart the economy, so the demand is gradually improving, especially when the United States enters the summer driving season, the demand for crude oil will also increase to a certain extent. On the Chinese side, the resumption of work and production is ideal, and schools are also resuming classes one after another. At present, the epidemic has come to the "end", the demand for crude oil continues to pick up, and the gradual improvement of the demand side also helps the oil price rebound. According to SunSirs, the oil price is still at a relatively low level in history. The recent continuous rebound is due to the easing of the contradiction between supply and demand of crude oil. However, the current market demand is still weak and in the process of gradual recovery. Moreover, the overseas epidemic of COVID-19 is still serious, which is also the biggest risk factor. Therefore, in the short term, the oil price will continue to fluctuate. Supply and demand will also seek rebalancing in the context of the epidemic. In the long run, with the end of the epidemic, the demand will be greatly increased, the oil market will regain confidence, and the oil price is expected to continue to rise.

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