- OPEC sees oil price to be $40 starting from the third quarter.
- The global economy revival and the 9.7 million bpd cuts that OPEC and its allies pledged for May and June will contribute to lift oil prices.
- On Monday, Brent Crude was down by nearly 5 percent at $20 a barrel, and WTI Crude was crashing by more than 20 percent to below $14 per barrel.
- Oil market players continue to focus on the imminent threat of global storage overflowing rather than on the effect of the cuts and eased lockdowns.
OPEC sees oil rising to $40 in second half of 2020, Tsvetana Paraskova for an article published in Oilprice.com.
Recovery path
Mohamed Arkab, Energy Minister of OPEC’s rotating president Algeria said, oil prices are set to recover with –
- OPEC+ production cuts and
- gradual lifting of lockdowns around the world in the second half of 2020.
Arkab said oil price “will be $40 starting from the third quarter.”
Plight of global economy
Arkab said the below factors are set to lift the oil prices in H2 2020:
- The global economy will revive and not be paralyzed for too long.
- The 9.7 million bpd cuts that OPEC and its allies pledged for May and June.
China driving up global demand
According to Algeria’s energy minister, China, which was hit first by the coronavirus, and which lifted off its lockdown first, has returned to normalization in the transportation sector and “is driving up global demand.”
Storage shortage is the problem
Few days before the OPEC+ deal came in to force, oil prices crashed again on Monday. This crash was mainly due to the market seeing the imminent storage shortage problem as a bigger factor for prices than the potential effect of the OPEC+ cuts and the potential easing of the lockdown measures.
Brent Crude rate fall
At 8.30 a.m. EDT on Monday-
- Brent Crude was down by nearly 5 percent at $20 a barrel, and
- WTI Crude was crashing by more than 20 percent to below $14 per barrel.
Reducing crude production and supply
Kuwait
Last week, OPEC’s fourth-largest producer, Kuwait, said responding to the market conditions, it had already started to reduce crude oil supply to international markets ahead of May 1.
Saudi Arabia
According to reports, Saudi Arabia, OPEC’s top producer and the world’s top oil exporter, has also begun to reduce production earlier.
No production cut
However, Nigeria and the leader of the non-OPEC producers, Russia, haven’t rushed to cut production ahead of schedule.
Global storage overflowing
Oil market players continue to focus on the imminent threat of global storage overflowing rather than on the effect of the cuts and eased lockdowns two to three months down the road.
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Source: OilPrice.com
