FX.co ★ What to expect from oil prices in autumn?

Benchmark oil prices are still volatile and are declining again. Thus, WTI futures for October dropped by 0.07% to trade at $43.36 per barrel. At the same time, Brent futures for November fell by 0.11% to settle at $46.21 per barrel. The difference in price between the Brent and WTI contracts is $2.85 per barrel.

The US Dollar Index, which measures the US dollar against a basket of six major currencies, rose by 0.10% to trade at $92.907.

Most analysts are confident that the market will recover soon. Nevertheless, what will happen with oil prices in the autumn?

Experts from the EIA believe that oil demand in 2020 will amount to 92.6 million barrels per day. This is significantly lower than last year. Demand is expected to grow by 7 million barrels per day to 99.6 million barrels per day in the next year. Analysts suggest that by the end of 2020 it would be possible to achieve a balance in the oil market, but this is only an assumption. The market situation is ambiguous and the number of negative factors still exceeds positive ones.

The price is supported by factors such as US sanctions against Venezuela and Iran, chloride pollution of the Druzhba pipeline and limited supply amid rather strong demand. However, these are short-term external factors.

Iran, which has reduced production to its lowest level over the last 40 years, is the main competitor in the market. The country has a record decline in production due to overflowing storage facilities. The volume of reserves in June 2020 exceeded the reserves from January by almost four times. A similar situation is also observed in the United States and Saudi Arabia.

There are also new requirements for ship bunkering. This, in turn, will lead to changes in oil prices. There will also be price adjustments for the market as a whole.

Today, coronavirus is the number one problem that puts pressure on the oil market. In case of a rise in infections or a second wave of COVID-19, oil prices will collapse again. This will negatively affect economic recovery and oil demand.

Surprisingly, oil prices themselves are a negative factor. If quotes exceed $50 per barrel, US production will seriously hamper the efforts of the OPEC + group. As a result, the restoration of the supply and demand balance may slow down. And with oil prices above $60 per barrel, the world will return to the situation of 2019, when the main destabilizing factor that neutralized the efforts of the OPEC + participants was the success of American oil companies.

An excess in oil reserves also negatively affects prices. Oil tankers chartered by trading companies around the world store at least 20% of the global daily consumption of oil. When necessary, someone may increase or decrease the offer by manipulating prices.

Moreover, the situation is complicated by the tense relations between Washington and Beijing. Both countries are important players on the scene. Their conflicts also weigh on the market.