Even though the new OPEC+ deal is set to come into force this week, oil prices will not rise much in the near future because of very high global inventories, Russian Energy Minister Alexander Novak said in an article published in the ministry’s publication Energy Policy on Tuesday.
The oil market could begin to balance in the second half of this year, as demand is expected to recover with easing of travel restrictions and supply is set to be reduced due to the new OPEC+ production cut deal, Novak said.
Russia thinks that the result of the new agreement will depend on how fast the global economy could recover, which would lead to higher demand for energy resources, the minister added.
China is already showing signs of recovering economic activity and we hope that other economies could see positive developments in a few months, too, Novak said, but warned:
“Nevertheless, you should not expect a jump in oil prices in the near term, due to the current oversupply on the market.”
The current situation in the oil market with prices plummeting is tough, but the market shouldn’t be judged by a one-day or even a week-long slump, Vladimir Putin’s Press Secretary Dmitry Peskov said last week, calling for patience and an assessment of the market when the new OPEC+ agreement takes effect on May 1.
Last Tuesday, minister Novak said in a statement that the pressure on the highly volatile oil market would continue until the start of the OPEC+ cuts in May, until production in the countries outside OPEC+ starts coming off the market, and until countries begin easing lockdowns. Attributing last week’s plunge of the WTI Crude May contract to the expiring futures contract and lack of storage, Novak said there was no need to dramatize the situation. OPEC+ countries are following the market closely, and they have all the instruments to react, if necessary, the Russian minister said.
Oil prices are set to recover with the OPEC+ production cuts and gradual lifting of lockdowns around the world in the second half of 2020, when oil prices “will be $40 starting from the third quarter,” Mohamed Arkab, Energy Minister of Algeria and OPEC president, said on Sunday.
By Tsvetana Paraskova for Oilprice.com
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