In any case, oil prices will rise slightly in any case.
According to the results of 2020, oil prices may be fixed at around $ 45 per barrel, experts say. Thus, already in early June, the Brent barrel exhausted most of the growth this year.
The further dynamics of the recovery of the oil sector's pricing environment will be restrained. In addition, experts believe that on the way to the restoration of the global economy, oil prices will be very volatile. And their strengthening above $ 50 per barrel will not happen until next year.
Positive factors for oil prices
Today, several factors are accompanying the increase in oil prices. First of all, the demand for oil was affected by the removal of part of the restrictions, “economic activity is growing, and with it the demand for oil and its derivatives, which can already be indirectly seen through traffic monitoring in large cities and the growing daily number of flights,” explained to TASS, senior analyst at Alfa Capital Maxim Biryukov.
The growth was also facilitated by a significant reduction in oil production by leading exporters in May-June. Thanks to this, 2/3 of the April excess of oil left the market, added Veles Capital analyst Alexander Sidorov. They influenced prices and speculations in anticipation of the extension of existing production restrictions for the main parties to the transaction, said Alpari’s deputy director Natalia Milchakova.
“Of course, expectations of the outcomes of OPEC and OPEC ++ meetings play a significant role in the oil rally in early June. At the summit, a decision may be made to extend the current quota of production cuts by 9.7 million barrels per day until August. And perhaps until September of this year. If such a decision is made, it could become an additional driver of rising oil prices, ”she explained.
Negative factors for oil prices
Nevertheless, according to experts, many significant factors will prevent further dynamic price increases. According to experts, the forthcoming extension of OPEC agreements, as well as the gradual recovery of economies after lifting quarantine measures, does not guarantee a steady increase in oil prices.
“Despite the fact that the weakening of the crisis caused by the spread of coronavirus implies a growing demand for oil and should push prices are up, many market participants will be able to quickly abandon production restrictions, increasing supply and lowering prices, ”explained Maxim Biryukov. In particular, “if for the countries participating in the new OPEC + deal this may still require coordination, then, for example, the United States will be able to return drilling platforms to operation as soon as economic feasibility arises,” the expert believes.
Among other things, the possible excess of demand over production volumes, projected in the IV quarter against the backdrop of a deal by exporting countries, can be offset by accumulated reserves in the 2nd and 3rd quarters of 2020 and limit the price increase, added Vladimir Potapov, VTB Senior Vice President.
If that happens disruption of negotiations regarding the extension of quotas for production reduction in May-June, prices may fall, added Freedom Finance analyst Alexander Osin.
Oil prices depend on the extension of the current reduction in OPEC + production
“Without the extension of the first,“ tough ”stage of the OPEC transaction, the estimate of oil surplus on the world market at the end of the first or beginning of the second quarter will be relatively high 3.6 million barrels per day, and this circumstance can shake market confidence, lead to a new recession, macroeconomic and political complications, ”the expert explained.
In addition, in the event of a new round of trade confrontation between the US and China or getting out of control of the situation with unrest in the US, market sentiment may also shift toward increased caution. At the same time, oil, like other risky assets, will undergo correction, also said BCS Prime economist Anton Pokatovich.
V-shaped recovery in oil demand is also unlikely by PSB experts. According to the chief analyst of the company Ekaterina Krylova, this is also due to the slow start of the automobile season. “Demand for petroleum products in the United States remains 20% below normal for this period,” she explained. The expert added that a real, not speculative, recovery in oil prices will happen no earlier than next year. : ///
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