On Tuesday, September 8, trading in the global energy market was accompanied by a sharp decline in world oil prices.
In the afternoon, the price of Brent crude on the ICE exchange in London fell by more than 6% to $ 39.3 per barrel.
At the same time, the American WTI grade fell in price by almost 9% - to $ 36.1 per barrel.
The last time similar values could be observed back in mid-June.
As the head of the analytical department of AMarkets Artyom Deev told RT, one of the reasons for the drop in quotations was the increase in cases of coronavirus detection in many countries.
According to Johns Hopkins University, the number of people infected with COVID-19 in the world today exceeded 27.3 million. As a result, investors fear a slower-than-expected recovery of the world economy and global demand for oil, Deev explained.
“At the moment, the optimism associated with a possible revival of demand has dried up.
In addition, Saudi Arabia announced a new price cut for buyers in all regions the day before.
For example, for Asian countries, Riyadh reduced prices by $ 1.4.
At the same time, only four out of ten largest Asian oil refineries are ready to take advantage of such a price offer, which indicates a very low demand for energy resources, ”the expert added.
According to Alexey Kiriyenko, Managing Partner of EXANTE, investors also reacted negatively to increased drilling activity in the United States.
According to Baker Hughes and the US Energy Information Administration (EIA), in mid-August, the number of active oil rigs in the United States fell to a minimum since the 1940s and reached 172. However, after that, the figure began to rise and today is 181.
“We see that drilling activity in oil production in the US has stopped declining and is cautiously increasing.
Perhaps this was the reason for Saudi Arabia to lower prices, thereby starting another struggle for markets, ”Kiriyenko said in a conversation with RT.
The end of the auto season in the United States also put pressure on oil prices.
As Artyom Deev explained, traditionally at this time in the country there is an increased consumption of oil products.
Nevertheless, with the onset of autumn, the demand for fuel from motorists began to decline.
Meanwhile, experts admit that the weakening of oil quotations continues to restrain the actions of the countries participating in the OPEC + deal.
As a reminder, since May 1, the members of the agreement have resumed their partnership and, in order to combat the global surplus of raw materials, they are reducing oil production.
The actions of the states are aimed at restoring the balance of demand and supply of hydrocarbons in the world market, which should support the rise in prices after the spring collapse.
From May to July, production of raw materials in the countries participating in the agreement decreased by a total of 9.7 million barrels per day compared to the level of October 2018.
Since August, the states have agreed to somewhat soften the restrictions - up to 7.7 million barrels.
According to EIA estimates, as a result of the actions of states, a deficit may appear on the global commodity market in the fall.
According to the head of the Ministry of Energy of Russia Alexander Novak, in the absence of agreements between the exporting countries, prices for raw materials would be at least twice as low as the current level and would be near $ 10-20 per barrel.
The minister said this on September 2 at a meeting on the current state of the oil and gas industry in Russia.
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© Leonhard Foeger
According to Aleksey Kiriyenko, in the event of a further decrease in oil prices, the participants in the OPEC + agreement may again increase the reduction in oil production and thereby restrain the decline in oil prices.
“Russia, Saudi Arabia and many other OPEC + members have shown miracles of pliability and mutual friendship more than once.
So with a further increase in volatility, it is impossible to exclude verbal interventions by the largest oil producers and, possibly, even real agreements that remove part of the oil from the market, now or in the coming months, ”the expert emphasized.
In his opinion, in the near future, quotations may further decrease and reach the range of $ 30-35 per barrel, but at the same time, by the end of the year, the value may return to $ 50 per barrel.
Moreover, as Alexander Novak previously suggested, in 2021 prices can recover to the level of $ 50-55 per barrel.