Oil below$ 60 is a serious blow to OPEC
Oil prices fell below $60.00 per barrel, and this is a serious blow to the OPEC countries, particularly Saudi Arabia. OPEC is likely to have overestimated the growth of energy demand, the quotas for the reduction of oil production proved to be ineffective. Oil prices continue to fall, as due to the trade dispute between the US and China, there are growing concerns about demand and the slowdown in economic development.
Geopolitical issues related to a trade war, completely overshadowed by tensions in the middle East.
After the G20 summit, many hope that the conflict between the US and China will be exhausted. But in reality, a trade war is gaining momentum. The Chinese company has stopped buying American agricultural products in response to the decision of Donald trump to impose 10% tariffs by another $300 billion.
The participants of the oil market, which operate with futures contracts for the black gold, initially relied on the underlying strategic scenario of stabilization of the market, and OPEC successfully implemented. But as time has shown, the old quota to reduce oil production by 1.2 million barrels per day was ineffective against the influence of the us-Chinese trade disputes.
In my opinion, the OPEC countries now need to hold an extraordinary session to revise the quota to reduce oil production to stabilize the market. If you temporarily create an artificial shortage of oil, prices could rise to $70,00 per barrel. This displays the airbag in a range from $65,00 to $70,00 per barrel in various additional problems related to trade wars.
Under current conditions, oil prices will continue to experience the pressure. Volatility in the moment can be associated with the publication tonight of the data from the news Agency of energy of the USA (EIA). Brent will continue to fall to $58,00 per barrel and shale oil WTI could move to $52,50 per barrel.
“International financial center”