Oil prices stabilized in morning trading today, Thursday, after dropping a few days ago to below $ 40 a barrel, for the first time in 3 months, amid expectations that Brent crude prices would drop to between $ 35 and $ 37 for the short period, against optimistic expectations for next year.
A report in the Russian newspaper Izvestia says that the decrease in oil demand due to the spread of the Corona virus and the high level of oil reserves in the world are the reason behind the price decline.
Other factors that led to the decline in oil prices before returning to rise slightly were additional cuts by Saudi Arabia, as well as speculation in prices associated with the storms of the Gulf of Mexico.
Experts believe that the decline in oil prices is a short-term phenomenon, and on the horizon the price of black gold will return to the level of 40 and 45 dollars per barrel.
Supply and demand
The newspaper’s report adds that the beginning of September was marked by an important rise in oil prices, as the Brent oil futures contract for November exceeded $ 46 a barrel, and by the evening of the second of September it reached $ 44.24, and on the eighth of the same month it fell The price of black gold to $ 39.65 for the first time since last June.
Artem Deev, principal analyst at AMarkets, ruled out a rapid recovery and a recovery in demand.
The Russian newspaper's report quoted Deev as saying that oil prices are identical to the real situation, and that the recovery of the black gold market will require a long period, and it may never return to its previous levels.
According to Reuters, there has been little change in oil prices today, Thursday, after they decreased earlier, as the prospects for demand are still shrouded in uncertainty due to the high number of Coronavirus infections in many countries and at the time when data revealed the unexpectedly high US crude stocks in last week.
By 06:57 UTC, US West Texas Intermediate crude futures fell 0.1% to $ 38.01 a barrel after increasing 3.5% on Wednesday, while Brent crude futures rose very slightly to $ 40.81 a barrel after rising 2.5 % Yesterday Wednesday.
As a result of coordination between OPEC Plus countries, the volume of oil reserves decreased, but this was not sufficient to support prices (Reuters)
Accumulated precautions
For his part, Alexander Frolov, Deputy Director General of the Russian National Energy Institute, believes that the market is under pressure due to the huge level of excess oil reserves accumulated in the first half of this year.
Thanks to the joint efforts of OPEC Plus countries, the volume of reserves decreased, but this is not sufficient to guarantee high oil prices, according to the newspaper's report.
Frolov says, "It is naive to expect all the problems caused by the Corona virus to disappear, and oil prices will continue in the near future to follow the model" two steps forward, one step back. "
In turn, Natalia Milchakova, Vice President of the "Alpari" Center for Analysis and Information, believes that oil prices are declining amid fears of declining demand in exchange for high supply, and the absence of coordination between OPEC Plus members.
Other factors
Head of the stock market experts division at BCS, Vasily Karbonin, believes that the drop in oil prices could be a result of Saudi Arabia's intention to grant discounts to Asian buyers on raw materials, but only 4 out of 10 refineries are willing to benefit from this. Situation and purchase of raw materials.
Carbonin believes that the data on the increase in infections with the Coronavirus could be a reason for a decline in oil prices, according to the Russian newspaper.
According to Reuters, oil prices fell this week after Saudi Aramco reduced the official selling prices for Arab Light crude for October delivery, indicating weak demand.
In general - the newspaper says - experts agree that in the near future, the price of a barrel of Brent crude may break the barrier of $ 37 a barrel.
In this regard, Artem Deev stated that it is difficult to provide accurate forecasts, given the risk of a second wave of the epidemic in the world, while Carbonin believes that a decline in the price of Brent crude to below 35 and 37 dollars is possible.
An optimistic vision
On the other hand, Morgan Stanley said in a note on Wednesday that it expects Brent crude prices to rise to $ 50 a barrel by the second half of 2021, supported by the decline of the dollar and increasing inflation, and the banking institution also raised its forecast for the price of WTI crude for the third quarter of 2021. To 47.5 dollars a barrel.
It also expected the return of global demand for oil to its pre-Covid-19 crisis by mid-2022, according to Reuters, but said that the basic factors for the oil market in the short term appear weak in light of the fragility of the recovery in demand, high inventories, surplus energy and the lack of refining profit margins.