Corona, the US elections and OPEC Plus .. Are oil prices witnessing a further decline?

A number of analysts expect the price of Brent crude to drop below $ 35 in the coming period due to the accumulation of stocks and the decline in global demand for oil.

In a report published by the Russian newspaper "Izvestia", writer Valery Voronov confirms that a number of factors explain these pessimistic expectations regarding oil prices, including the continuing outbreak of the Corona virus, tightening quarantine measures globally, the resumption of production in Libya, as well as the uncertainty before the presidential elections in United State.

It is not unlikely, according to the author, that the price of black gold will return to the level of $ 45 a barrel by the end of this year, in light of OPEC Plus countries' adherence to the agreement signed earlier this year, which is the main factor in the price recovery so far.

Sudden drop

In today's trading, the global benchmark Brent crude futures contract for January delivery fell by 3.71%, to reach $ 36.54 a barrel, the lowest level since early June.

US West Texas Intermediate crude futures, for December delivery, also fell 4.37%, to $ 34.25 a barrel, according to Anadolu Agency.

The principal analyst at "A.Markets" Artem Dave had expected that the price of Brent crude would reach $ 36 a barrel, and that the prices of West Texas Intermediate crude would range between 33 and 34 dollars a barrel, according to the Russian newspaper Izvestia.

Other experts agree with these expectations, and confirm that all conditions are ripe at the present time for lower oil prices.

According to independent analyst Dmitry Adamidov, futures contracts can reach very low prices, and may reach negative levels, and the price of oil may reach below $ 35, although this possibility is somewhat weak.

Natalia Milchakova, an expert in the Russian "Alpari" group, believes that oil prices may reach $ 34 a barrel, stressing that it is unlikely to drop below that.

If Biden wins the presidential race, he expects the sanctions imposed on Iran to be eased, which means increasing global oil production to record levels (Reuters)

Closures and the US elections

Artem Dave believes that the new lockdown measures due to the spread of the Coronavirus will significantly affect oil prices.

For example, Germany and France imposed a one-month quarantine, while Spain imposed a 6-month quarantine.

Dave adds that the resumption of oil production in Libya will also be a factor.

At the beginning of last month, production was at the level of 500 thousand barrels per day, before reaching about 700 thousand barrels per day by the end of the month, and it is expected that production will exceed one million barrels per day by mid-November.

Dave explains that Libya is not committed to the OPEC Plus agreement, which allows it to maintain the level of production at the maximum level, according to the Russian newspaper.

Economist Maria Belova believes that the possibility of widespread closure measures around the world, as happened in the first wave of the Covid-19 epidemic, may lead again to a major imbalance in the levels of oil supply and demand, as happened in March of this year. .

Belova explained that the spread of the Corona virus last spring led to the collapse of oil demand, and the surplus supply at the peak of the decline in consumption in April reached 19.5 million barrels per day.

However, consumption levels gradually returned, reaching their peak last October, and demand has exceeded production levels by 3.2 million barrels per day.

Artem Dave confirms that the ongoing controversy with the approaching US presidential election and expectations that Joe Biden will win, are two other factors that may lead to a drop in prices to between 30 and 35 dollars a barrel.

If Biden wins the presidential race, it is expected that the sanctions imposed on Iran will be eased, which means increasing global production to record levels, and the possibility of a price collapse.

Russia does not see a need to change any clauses in the OPEC Plus agreements to reduce oil production (Reuters)

OPEC Plus agreement

Experts believe that the OPEC Plus agreement signed last April is the only factor preventing the collapse of oil prices.

The commitment of the producing countries to the terms of the agreement could also lead to an increase in prices by the end of this year.

The head of the economics department at the Russian Energy and Finance Institute, Marcel Salikov, expects that oil prices will rebound by the end of 2020 and early 2021, and that the price per barrel will exceed $ 45.

And Russian Energy Minister Alexander Novak said after the last ministerial meeting of OPEC Plus countries that an agreement had been reached to continue implementing the agreements in full.

According to the agreement, member states will start increasing production at the beginning of 2021.

Last week, Russian President Vladimir Putin stressed that there is no need to change any clauses in the OPEC Plus agreements, but he did not rule out the possibility of taking new decisions to maintain the current restrictions, or reduce production if necessary, according to the Russian newspaper.

In the context, the Interfax news agency reported, on Monday, citing sources, that senior managers of Russian oil companies discussed with the Russian Minister of Energy a possible extension of the current oil production cuts to include the first quarter of 2021.

Interfax said, quoting one of the sources, that oil companies favor an extension of the existing cuts during the first quarter of 2021 instead of increasing the size of the cuts, according to what Reuters reported.