Exporters are looking for a way not to drop prices
Oil quotes, which seem to be holding above $ 40 per barrel since the beginning of October, may collapse at any moment. The second wave of coronavirus and the US presidential election prepare the barrel for more unpleasant surprises. Exporting countries, united in the informal organization OPEC +, began to look for a way to prevent a collapse in the commodity market.
The challenges that the global oil market may face in the near future are drawing heightened attention from the leaders of the leading producing powers. Last week, Russian President Vladimir Putin twice discussed the situation in the energy sector with the Crown Prince of Saudi Arabia Mohammad bin Salman Al Saud on October 13 and 17, and on Monday, October 19, OPEC + called on its participants to develop a new plan for the development of industries in 2021.
The current situation in the world oil market is characterized by the fact that producing countries hungry for dry rations under the OPEC + restrictions may throw additional barrels into the market. But the second wave of coronavirus and the negative economic consequences of the aggravated spread of the disease deprives fuel producers of hopes for increased sales and forces them to come to terms with another protracted round of falling prices.
Moreover, the main fears of oil producers are constantly coming true. China, the largest importer and the second-largest global consumer of oil, on which the sales markets of developing countries largely depend, is slowing down the pace of economic development: in the first ten months, growth was only 4.9%. The demand for raw materials in China fell from a record 12.9 million in July in the fall to 11 million barrels per day.
For local consumers, according to Refinitiv Oil’s forecast, October will be the last busy period for oil imports. Moreover, since too many tankers filled with hydrocarbons have accumulated in the ports near the Celestial Empire since mid-summer, the market is likely to receive raw materials from reserve volumes, and not barrels purchased the day before. A similar situation is observed on the coast of Venezuela: their tankers, loaded to capacity in the spring, are either sent back to onshore oil terminals, or their volumes are sold directly at sea at dumping prices to unknown speculative buyers.
“This meeting of OPEC + ministers will be the fifth in a row since the beginning of the unprecedented crisis in the oil market, which has brought down fuel consumption in the world by 10% this year,” said Sergei Suvorov, investment strategist of Arikapital Management Company. – They will sum up the results of the execution of the “black gold” cut, due to which the representatives of the alliance have been trying to manage oil quotations in recent years. At the same time, the method of drastically reducing or increasing the production of raw materials against the background of an impressive oversupply of reserves provokes mining companies not only to look for additional sales opportunities but also to create them on their own – to invest in modern energy-intensive technologies.
Dmitry Babin, an expert on the stock market BCS World of Investments, believes that in the current situation when producers and consumers of raw materials amid the coronavirus are unable to coordinate their capabilities and needs in the long term, it can be assumed that the global demand for “black gold” will not reach the pre-crisis level. “Until the end of autumn, Brent quotes will remain in the $ 37-47 corridor, gravitating towards the lower border, by January, the cost of the barrel is at risk of falling to $ 32,” the analyst predicts.