On Monday, April 6, world oil prices are falling during global trading. At the beginning of the session, quotes of the North Sea brand Brent and American WTI fell by almost 10% - to $ 30.7 and $ 25.4 per barrel, respectively. However, already in the middle of the day, the pace of cheapening slowed to 3%, and prices reached $ 33 and $ 27.5 per barrel.
Oil began to fall in price after a sharp rise in price on Friday. So, at the April 3 auction, the cost of Brent raw materials grew by 6% on average, but already in the evening the growth accelerated to over 40% in the moment, and quotes exceeded $ 36.
Investors reacted positively to the statement of Donald Trump about a possible reduction in production of raw materials by Russia and Saudi Arabia by 10-15 million barrels per day, as well as the call of Riyadh to hold an urgent meeting in the OPEC + format. Initially, a teleconference of ministers of countries - exporters of raw materials was to be held on April 6. Later, the participants decided to postpone negotiations until April 9, which was negatively perceived by the market.
“On Friday, the impression was created that the issue of a new OPEC + deal was almost resolved, and on Monday a reduction in oil production by at least 10 million barrels per day would be approved. In particular, Vladimir Putin announced the possibility of such a step on April 6. However, already at the weekend it became clear that there were still serious disagreements among the key oil producers, which was why negotiations had to be postponed, ”Dmitry Babin, stock market expert at BCS Broker, told RT.
According to him, the contradictions between the oil-producing countries are associated with the allocation of quotas to reduce the production of raw materials. Moreover, members of the OPEC + alliance insist on the United States joining the deal.
According to the statement of the head of the Ministry of Energy, Alexander Novak, in order to achieve stability in the oil industry, the active participation of all major producers, including Russia, Saudi Arabia, the United States and other countries that are both not members of OPEC, is necessary. This was announced by the minister on Friday at a meeting with the president. According to him, oil producers should agree to reduce production volumes and stabilize the situation in order to prevent collapse in the markets.
“Russia and Saudi Arabia are ready to participate in the new agreement only if the States join in one way or another to reduce oil production. However, due to domestic antitrust laws, the United States cannot formally participate in such cartels and this is the official position of the American side, ”explained Dmitry Babin.
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As Artyom Deev, head of the AMarkets analytical department, told RT, the situation in the global energy market remains uncertain, and in the near future, oil prices will continue to fluctuate depending on negotiations on the OPEC + deal. At the same time, news on the spread of coronavirus still exerts significant pressure on quotes.
According to official data from the World Health Organization (WHO), the total number of people infected in the world exceeded 1.17 million, more than 64 thousand people died. According to Deyev, the spread of the disease and quarantine measures provoked a massive reduction in trade, passenger traffic and fuel demand. As a result of the drop in energy consumption, the cost of oil also decreases.
“The development of the pandemic has already paused more than 90% of the global economy, which means that oil demand will continue to decline,” said Artyom Deev.
Recall that in 2019, global oil demand averaged about 100 million barrels per day. According to the International Energy Agency, nearly 60% of this volume was fuel for vehicles.
As the head of the organization Fatih Birol previously stated, due to restrictions on air travel and quarantine measures, global energy consumption could be reduced by almost 20%.
According to RT analysts surveyed, a possible decrease in oil production by 10-15 million barrels per day by the participants in the OPEC + deal can only partially compensate for the drop in demand. At the same time, it will be possible to finally stabilize the situation in the global energy market only after passing the peak of the pandemic and lifting quarantine measures.
“If restrictive measures detrimental to consumer and business activity are lifted in the coming months, then by the end of the year the price of Brent oil may recover to $ 50 per barrel. If quarantine among the largest oil consumers continues in the second half of the year, even with the new OPEC + deal, oil prices are unlikely to gain a foothold over the level of $ 40, rather, will return to the corridor of $ 20-30, ”concluded Dmitry Babin.