The oil markets are following stocks higher on the hope that the Coronavirus is showing signs of peaking and talk that OPEC plus is closing in on a deal for a significant cut in global oil production. Talk of a 10 million barrel a day plus decrease in production should ease concerns that global storage will soon run out. Not only is OPEC and Russia looking to restrain output, but a meeting of G-20 oil ministers on Friday could set the stage for historic global coordination to curb global oil supply.

Bloomberg News reports that “oil diplomats are planning an emergency meeting of G-20 energy ministers for Friday, part of an effort to bring the U.S. and other big oil producers outside the OPEC+ alliance -- such as Canada and Brazil -- on board, according to two people familiar with the situation.” The size of the cut may be dependent on how much the U.S. and Canada are willing to kick in, and reports show that at least some U.S. and Canadian producers are eager to join in. Brazil and Norway are attending the G20 meeting, and reports suggest they are open to joining OPEC plus in a production cut.

The G-020, even having a meeting to join OPEC plus in a production cut, shows that the world understands the long term risk to the global economy by a potential collapse of the worldwide energy industry. While demand is weak now, there are signs that it will return to growth, and without a healthy energy industry, it could set the stage for a price shock that could knock the global economy back down just as it was getting up off of the mat.

The movement by OPEC and Russia and the G-20 also is a reason that the WTI will not hit single digits. While the May futures contract is still most vulnerable, the June contact is already pricing the beginning of an oil demand recovery. Oil products like gas and distillate are showing price recovery as refiners cut production and demand rises.

Markets are also getting a bounce on the fact that Fed injections into the system have had their intended effect. The Wall Street Journal reports that “Key parts of the U.S. debt markets are functioning again, a sign the Federal Reserve’s extraordinary steps are easing a credit-market crunch. Investors say the Fed has reduced disruptions in the $17 trillion U.S. Treasury’s market that had sent shock waves through the financial system. Large businesses such as Oracle Corp. ORCL 4.23% and CVS Health Corp. CVS 0.90% are borrowing money at a record pace. Some lower-rated companies are issuing bonds again. And increased demand for mortgage bonds is starting to pull mortgage rates lower after they unexpectedly rose last month. Markets overall have grown more stable recently, supported by the Fed, the $2 trillion economic-rescue package passed by Congress, and some early indications that lock-downs in the U.S. and Europe may be helping slow the coronavirus pandemic.”

Natural gas is also bouncing back on a return to economic optimism. In a must-read, Naureen S. Malik at Bloomberg reports, “Oil has collapsed into a structure called super-contango as crude for delivery this year trades at a steep discount to contracts further out. U.S. natural gas might be next. It’s not unusual for summer gas futures to trade below contracts for the colder months when demand for the heating and power-plant fuel peaks. But this year, the COVID-19 pandemic has slashed gas consumption as businesses shut, sending near-term contracts to a quarter-century low after a mild winter. Prices for next year, however, have climbed on speculation that the oil rout will cut the supply of gas that’s produced alongside crude in shale basins. Gas will reach super-contango when summer contracts trade $1.50 per million British thermal units below winter futures, according to Francisco Blanch, head of commodities and derivatives research for Bank of America Corp. The discount for this June versus January 2021 is about $1, more than double the gap for the equivalent contracts a year ago. Super-contango creates an incentive for traders to buy gas now, store it, and lock in future profits. The problem is that gas is much harder to stockpile than oil, which can be stashed away in metal barrels or on rail cars. Though gas is kept in underground aquifers and depleted salt caverns, those facilities can only hold so much of the fuel. Cratering prices create the risk that U.S. liquefied natural exports will be curtailed on a large scale. If that happens, storage facilities “cannot stomach” the resulting oversupply unless prices at the benchmark Henry Hub in Louisiana go even lower, according to Bloomberg. Gas inventories will climb to an all-time high by the end of October, and potentially test the demonstrated working capacity in the lower 48 states, said Samantha Dart, head of gas research at Goldman Sachs Group Inc.

What Bloomberg NEF says current forecasts, which factor in COVID-19, already place end-of-summer storage above the U.S. total working storage capacity of 4Tcf. Any non-trivial export reduction would make an already loose situation even worse. This would place significant downward pressure on Henry Hub futures to incentivize more power to burn and/or reduce production to balance the U.S. gas market.