From the Middle East to Siberia, the North Sea down to Latin America, the prices of cargoes of crude oil are rallying hard almost everywhere, underpinning a surge in headline futures markets.
Now, though, attention is turning toward just how sustainable the recovery will really be.
Brent crude traded on the ICE Futures Europe exchange has nearly doubled over the past month and is trading above $36 a barrel, while America's West Texas Intermediate — which dipped into negative territory at one stage — has also soared. All that's happened because global producers have slashed millions of barrels of output tightening the real supply of oil, while demand has started to recover, led by China.
Those dynamics have allowed multiple crude streams to fetch dollars-per-barrel premiums relative to the benchmarks they trade against, when just a few weeks ago they were being sold at deep discounts.
The dramatic turnaround means sellers are getting more for their oil, but higher prices can be self-defeating by enticing producers to ramp up output and quickly destroying margins that refineries are earning from processing crude.
"The early signs of recovery seem to be fueling a rapid re-pricing in parts of the market," said Richard Mallinson, an analyst at Energy Aspects Ltd.
"But a lot of the re-balancing depends on the supply that's gone offline remaining offline. We're not there yet, but you could get price levels where a lot of those early shut-ins start to be reversed."
With the notable exception of the U.S. Gulf, where traders are awaiting an influx of crude from Saudi Arabia, the prices of most physical grades have been rallying. The strongest have tended to be those streams most directly exposed to China, where oil demand has almost recovered.
The strength underscores just how fast the oil market tightened once prices collapsed last month and production began to plunge because of COVID-19 and its impact on consumption of transport fuels. Alongside the demand pickup, OPEC and its allies are cutting global output by almost 10 million barrels a day, and North American drillers have cut rigs at a frantic rate.
"Simply put, OPEC+ led production cuts and global shut-ins are working," RBC Capital Markets analyst Michael Tran wrote in a research note.