Oil Rises Again On Talk Of Late 2020 Recovery, Further Output Cuts

Optimism that oil prices at historic lows will prompt producers to continue to scale back was said to be responsible for crude jumping nearly 20 percent on Thursday, with West Texas Intermediate rising $2.72 to $16.50 per barrel and Brent trading 4.7 percent higher at $21.33 per barrel.

There also seemed to be an emerging sense of stability in the decimated industry with news of Oklahoma regulators stating they would help U.S. producers shut wells without taking away leases.

Bjornar Tonhaugen, head of oil markets at Rystad Energy, said the news was "a relief for producers that want to cut some output but were hesitating due to regulatory consequences."

However, he added that "The only concrete development that could give prices a boost that can last is either a rebound in demand, when [coronavirus] lockdowns are scrapped and industrial activity ramps up, or a generous and unprecedented production cut in addition to what OPEC+ decided" - a reference to the Organization of the Petroleum Exporting Countries' recent decision with allies to slash daily output by 9.7 million barrels.

Still, the modest recovery coupled with signs across the globe that the worst of the COVID-19 spread is over compelled Damien Courvalin, oil analyst for Goldman Sachs, to theorize that the market is in an inflection phase: "Even though demand may not recover quickly, the production shut-ins we're going to see in the next few weeks are going to create a lasting supply disruption.

"With that you'll get a tightening of fundamentals and a recovery in prices in the second half of this year."

He added that once it becomes apparent that the supply side is converging down to the demand level, "We should expect the first recovery in prices - not a meaningful one, but a relief rally...we think that will happen probably in June or July."

Courvalin's hopeful observation were given credence by reports that other countries have already begun slashing output in advance of formal agreements, case in point: Kuwait, whose state news agency disclosed that it has began reducing oil supply to the international market without waiting for the OPEC deal to come into effect on May 1.

Meanwhile, on the heels of a Stanford University study showing that a California county had up to an 85 times greater COVID-19 infection rate than previously thought, preliminary results from a coronavirus antibody study released Thursday showed that the New York state infection rate is 13.9 percent, or 2.7 million residents.

This coincides with growing evidence that the virus may be far less lethal than originally thought, which in turn supports the argument from a wide range of businesses that a back to work mandate should replace the stay at home lockdown policy currently governing the virus battle.

However, this notion conflicts with the mandate of many politicians who are either trying to play it safe or seeking re-election, case in point: Andrew Cuomo, governor of New York, who told reporters as lockdown protesters demonstrated outside the state capitol in Albany, "Economic hardship doesn't equal death."

In equating back to work with risking a death sentence, Cuomo - who drew criticism for extending the lockdown rules to May 15 in coordination with other states - omitted the fact that the coronavirus survival rate (even before the Stanford and New York testing results) was anywhere from the mid to high 90 percentile range.