Though Saxo Bank's Commodity Strategy Head, Olly Hansen, said that despite the massive collapse in oil prices in the near term, the long-term outlook seemed positive. As the demand for oil will return when the new Corona epidemic (Covid 19) recedes, albeit at lower levels, as a result of declining travel for commercial purposes, and companies adopting more flexible business models as a result of their experience during this pandemic, which showed that employee productivity is not significantly affected When working from home. "
He explained that the unprecedented collapse in the oil markets, as a result of excess demand, will increase dramatically before the situation improves. Noting during a briefing to "Saxo Bank" online, the markets may witness a drop in oil prices to their lowest levels during the next four or six weeks.
He stated that there is a risk that the price of the West Texas Intermediate mix will drop to $ 0 a barrel and Brent mix to $ 10 a barrel, but the long-term outlook appears positive. North Africa in particular, given its reliance on oil revenues mainly. "
The world witnessed an unprecedented collapse in demand for oil, which led to a significant drop in oil prices, at a time when global storage facilities are approaching their maximum capacity, which leads producers and buyers to search for affordable storage facilities.
"The slowdown in demand has caused oil to accumulate to unprecedented levels. If we do not see demand increase dramatically soon, storage facilities will reach their maximum capacity by the end of next May. We must store the oil that is produced, and 20 million can be produced," Hansen added. Barrel in the coming weeks, which will lead to greater pressure on oil prices. "
He pointed out that the performance of oil markets highlights the real economic impact of the spread of the Covid-19 pandemic. While the stock markets are supported by the strong performance of some large companies and the large supply of liquidity from central banks, the oil market has been subject to great pressure in terms of production, demand and storage.
Hansen believes that the problem of oil storage is essential to the future of the sector, focusing on the ability of producers to reach customers and storage facilities directly, saying that the current situation is worrying, although it was not more than three months. He added: "The main problem currently is storage. If we cannot store the oil that we produce, then we will have a problem in finding a way to spend it, and the countries that build oil storage facilities may be better able to deal with the current situation. As it is no longer a matter of oil production The lowest cost, but the storage of oil that can not be sold. "
The collapse in oil prices has led to great interest from investors seeking to take advantage of the lower prices, in the hope that the market will recover soon. Hansen warned against opportunistic oil trading during this volatile period, and highlighted the need for crude oil to rise by 64% during the next three months to restore the value of current investments in oil funds traded on the exchange.