Oil market: tipping point or commonplace rebound?

US, WASHINGTON (ORDO NEWS) — The oil market has become the center of major events last week. It all started when Donald Trump on his Twitter announced an agreement to reduce production with Russia and Saudi Arabia.

Quotes instantly went up, and growth continued on Friday. In two days, a barrel of oil went up by 33%. But is it worth waiting for a further recovery, or is it just a correction?

Of course, there are no fundamental factors for growth yet. As you know, due to the total drop in demand, in some places they were ready to give oil for free, just not to pay for its transportation or storage.

Oil would have fallen without the collapse of the OPEC + deal. But now a completely different game is starting, and the resumption of this deal, with additional participants, at least psychologically gives reason for optimism.

However, it is far from a fact that the parties will be able to agree. An urgent meeting has already been postponed from April 7 to a later date, now it will be held on either the 8th or 9th, Bloomberg reports. Parties need more time to discuss.

Alexey Buyanov, CEO of Bengala Investment, an investment company: “First, it’s worth understanding that this meeting does not guarantee that the parties will be able to agree. Secondly, even the proposed significant reduction of 10-15 million barrels per day does not stabilize the oil market, as the global economy continues to slow down due to the coronavirus pandemic, which negatively affects demand in this segment.

Nevertheless, such news has a good effect on oil prices, so in the near future we can expect the establishment of Brent prices in the range of $ 30-35, but if the deal breaks, there will be a sharp rollback to $ 20-25.”

By the way, on Saturday a message appeared that Norway was also considering a reduction in production – for the first time since 2002.

Now, price recovery is beneficial to everyone. The shale sector will not be able to take a long blow, as, indeed, Russia and Saudi Arabia, not to mention other countries whose economies are completely and completely dependent on oil.

It is worth saying that the number of active drilling rigs in the United States is falling rapidly. If at the beginning of March there were 793, now it is already 664, and it was precisely in recent weeks that the decline accelerated. Mining is still at a high level, but it is a matter of time.

The media now appears a lot of conflicting information that can be confusing.

It is also worth adding, it is not entirely clear how Trump will negotiate with his oil companies, including many small players, and in general, strict antitrust laws apply. In addition, Trump was an active fighter with cartels, but now he himself is ready to organize it.

True, there are reports that the US president is going to protect his energy sector in every possible way, and this could be a problem for reaching agreements.


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The article is written and prepared by our foreign editors from different countries around the world – material edited and published by Ordo News staff in our US newsroom press.