Bank of Canada Governor Stephen Poloz sees the beginning of better times for oil following the unprecedented collapse brought on by COVID-19 and a destructive price war between Saudi Arabia and Russia.
“We’re seeing glimmers that some of the pricing is being restored,” Poloz told reporters on Thursday. “I think the important thing is the fundamentals are very closely related to human activity. We can see already in the short-term data signs that driving is picking up.”
Speaking at his final press conference as governor, Poloz said the impact of the recent oil price shock on Canada’s economy has been similar to the crash in late 2014 and early 2015. That’s notwithstanding the “two shocks at the same” scenario brought on by the viral pandemic eliminating demand.
Poloz’s remarks follow the release of a report from the International Energy Agency (IEA) on Thursday pointing to global signs of recovery. In its monthly oil market report, the Paris-based agency said its outlook has improved slightly from “Black April,” when West Texas Intermediate (CL=F) prices turned negative for the first time.
“Since then, the outlook has improved somewhat and prices, while still far below where they were before the start of the COVID-19 crisis, have rebounded from their April lows,” the IEA said in the report. The agency said a resurgence of COVID-19 cases remains a major risk for demand.
The IEA credited “steep production declines” in non-OPEC countries, led by Canada and the United States, for helping drive prices higher, alongside commitments made by the OPEC+ members.
Scores of Canadian energy firms have reduced production in response to weak prices.
Poloz also pointed to the 700,000 barrel inventory decline reported by the U.S. Energy Information Administration on Wednesday for the week ended May 8 as another reason for optimism.
“I think the system is starting to pick up,” he said.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.