Oil price: June futures contract nears expiration

[hugeblack]

From the beginning of this year until nearly half a year after the outbreak of the coronavirus, energy markets have witnessed an unprecedented shock to oil consumption as most of the world's population has been imprisoned at home to slow the spread of the deadly Covid-19 virus, but have markets reached a turning point?

Oil continues to gain 8% jumped to a two-month high above $ 31 with the June contract nearing its expiry date as well as producers^[1] (OPEC and its oil-producing allies got 9.7 million barrels per day) dramatically reducing production, and with the start of lifting curfews and forecasts With demand increasing, the market is on a slow path to recovery.



So are we witnessing the ability of the oil market to rebound, or will we go through a completely new crisis, as happened last month^[3]? "Brent oil prices fall by more than 24%."

What are your expectations for oil prices in the second and third quarters of this year? Will we be back to $ 60 levels before the end of this year?



[1] Oil jumps 8% to two-month high above $31 as June futures contract nears expiration
[2] OPEC and allies agree to historic oil production cut
[3] U.S. oil’s June contract tumbles over 43% to 21-year low as May contract expires at $10 a barrel

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[vycl87]

We have extraordinary days in the world. They stay in almost all the world homes, away from the streets. In other words, individual fuel usage has decreased greatly. In addition to this, it is very difficult to make predictions about oil prices for the future as the use of public services and corporate fuel is also decreasing.

In the general course of the economy, the price was on an upward trend as oil use increased every year. Oil production was also interrupted in the same way as the borders were closed one by one. In addition to short-term forecasts, we can also predict an increase in fuel consumption along with the normalization process.

[FanatMonet]

To stabilize oil prices, quarantine must be lifted, because Now in the world about 100 million barrels of oil are produced per day, and consumption, from the level of 95-100 million, fell to 70-75 million barrels. And OPEC agreements compensate for only about half of this fall.

[Cnut237]

What are your expectations for oil prices in the second and third quarters of this year?

I think that CV19 will provoke lasting changes in society. It is often the case that seismic events such as this acccelerate the pace of change.
As quarantines are lifted, social distancing remains in place. This means many people will continue to work from home, it means air travel is effectively dead, it means that demand for oil will remain low. This is the immediate future.

Longer term? Last time we had a huge economic crisis, the response, at least in the UK, was austerity. The large scale cutting back of services in order to save costs. This time around, there is no more fat to trim, services are as lean as they can be without removing essential provision. Our health system has been sorely tested by the pandemic, due in large part to a decade of cuts and underfunding. There is no more appetite for austerity, and little scope for it anyway.
The alternative way out of a recession, in a climate of historically low interest rates, is investment in infrastructure. Now this is a left-wing approach, but right-wing governments around the world have recently implemented incredibly left-wing policies, including effective renationalisation of entire industries (albeit temporary) and a UBI in all but name. There may be an appetite to build a green infrastructure to get ourselves out of this, particularly as evidence from the fallout of 2008 shows that investment in renewables was disproportionately profitable compared to alternatives (yes, I know, [CITATION NEEDED], I haven't got a link at the moment). And particularly as this is a pandemic that affects the lungs, and clean air is obviously a good idea to alleviate the effects of the virus.

So whilst there may be a bit of a bump in prices as economies get back into gear, I suspect demand in the near-term will remain lower than before the pandemic, and in the longer-term, we may have a shift to renewables that could sound the death knell for fossil fuels.

[davinchi]

There is going to be an increasing amount of oil consumption you will see it. Why? Because people have been at home for months now, many people have already given up and going outside in face of death itself, there is literally a risk of DYING, the action of never existing again, and people look at it as "well I will take my precautions" and still go out right now. That number will keep on increasing more and more each day, you can't keep people at home any longer, even when death is on the line.

I will of course stay at home but I also do not drive car, never have, so I am not in the calculations. Maybe a billion more people will suddenly start to go out, all of that will have affects on oil, that is why I think we had months were oil was used a lot less, but we are going to have a summer where it will be used a lot more as well.

[Lucius]

What I have no doubt is that black gold will continue to flow, and that those who produce it will do everything in their power to make its price rise again. Consequently, the first step was taken in reducing oil production by only 9.7 million barrels per day, which is only 10% of world production - and experts say consumption has fallen by at least 25 to as much as 35 million barrels a day.

Therefore, in the short term, 10% cannot solve the problem - and even the effects of that reduction could only be seen during this month. It is logical that the demand for oil will increase as measures against the virus weaken, but this will go very slowly because many people will save on everything (due to job losses and rising cost of living). Whichever way we turn it is a double-edged sword, because reduced demand can cause the loss of millions of jobs related to this industry (around 10 million only in the USA) and if they lose their jobs, it will only make it harder to recover the economy.

The price will actually depend on whether the second wave of the pandemic occurs with the arrival of winter in the northern hemisphere, and in that case $60 per barrel has no chance of happening. As we can see in the infographic, the current crisis has far surpassed all those crises that have occurred in the past fifty years. No one could have even dreamed that price of crude oil would fall below zero, but we obviously live in a time when that is also possible.


https://blogs.worldbank.org/voices/outlook-commodity-markets-and-effects-coronavirus-six-charts

[Harlot]

So are we witnessing the ability of the oil market to rebound, or will we go through a completely new crisis, as happened last month^[3]? "Brent oil prices fall by more than 24%."

I cannot say that it is some kind of rebound, the spike in oil prices might just be investors trying to be in the market early in preparation of normal activities resuming after months of lockdown. It's the same thing that happened in the stock market where prices starter falling earlier even before any lockdowns or experience of full effect of the pandemic happening. Surely the price increase we are seeing now isn't cause by any kind of growth in terms of the demand for oil.

What are your expectations for oil prices in the second and third quarters of this year? Will we be back to $ 60 levels before the end of this year?

It will depend on how our world will be "normal" during those quarters. If we started seeing airline companies having full operations as well as factories continuing their production 60$ might be reachable this year assuming we are back to normal.

[plast555]

The world has started to slowly ease the lockdown several countries have prepared for saving the economy which will get greater impact than the pandemic  so the demand should slowly increase in the upcoming weeks or months but will I think the price will consolidate in the range of $40 to $60 and the production cut will not have a huge positive effect on the price as many of them already have a huge inventory

[stompix]

There is one more thing you have to consider when thinking of a rebound in oil prices, the demand for oil will be indirect, the damnd will be for gasoline and diesel, so we will have to also look  at the current deposits those have and the already purchased oil reserves for short term predictions
So there might be demand for gas and diesel but not proportionally for oil!

And, there might be one more bump ahead, and this not because of a second pandemic.
The industry has been kept going, for example right in my family village, agricultural activities haven't diminished a bit during all this time, you all have seen that stores have still been supplied and deliveries have made a killing, gas has been burned. What if when we all come out of the demand for gas for personal cars goes up, but the demand for products will not go back and a lot of factories that have been producing on stock will need to actually shut down? For example, a tire factory near my town has restarted production weeks ago, but at the start of this week it went to 50% capacity because they have the stocks full and there is not enough interest in buying.

We don't know how demand will turn out, and we don't know how the supply will act either, will all producer be able to keep up with there prices or they will stop drilling for new wells and wait, tricky situation, this is an event we have not witnessed before, a self-induced crisis and it can go either way. In a few months, we might look back and say, yeah it's normal that oil is still at 20$ cause there is nothing going in the right direction or that's right for it to be at 60$ since we're experiencing a miraculous recovery with people eager to consume.