The oil price looks optimistic. What are the reasons?
OIL: WTI is below $15
These days the oil market has a tough time as oil storages are full while the demand is extremely weak. No wonder that oil has become so cheap. And, it seems the price won’t increase until countries recover from after-effects of the coronavirus.
What do the numbers tell us?
The WTI (West Texas Intermediate) oil price has already broken below $15, the level unseen since 1999. The Brent oil price fell to $27.
The OPEC+ agreed to contract oil production by 9.7 million barrels a day, but this wasn’t enough at all. Most analysts consider that the oil demand decreased by nearly 20-30 million barrels a day.
According to Bloomberg, “buyers in Texas are offering as little as $2 a barrel for some oil streams”. That means soon producers will pay to customers just to take oil away from them.
What does it mean?
There are two scenarios. The most probable one is that the oil price will rise after the easing of lockdowns as the COVID-19 fades. There a lot of oil-dependent countries that need the price to go up to balance their sheets. That’s why they’ll make all efforts to achieve this goal.
The another scenario is that the oil price will be at such low levels forever. This is the end of the fossil fuels’ era and the beginning of the new era of the renewable energy.
The first one is more realistic. However, the way up of oil can take a year at least or even more.
Also, don’t forget that the market is more volatile now than before, follow the news and Trump’s twitter not to miss some fluctuations that you can gain from.
The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.
The US dollar’s weakness offered a boost to emerging-market currencies and oil.