By
Julia Sakovich
January 18th, 2024
As the oil price continues to dip following the effect of the coronavirus and the U.S. elections this week, many experts expect OPEC and its allied bodies to make policy moves to help prevent the complete market collapse.
Oil price fell on Monday as influenced by the continuous rise in the COVID-19 cases which has necessitated the need to impose new lockdowns particularly in Europe as well as the uncertainties surrounding the United States Presidential election. According to the Financial Times, the lockdowns which have now been declared by Boris Johnson, Britain’s Prime Minister as well as France and Germany are spiking fears of reduced demand in oil products.
The international standard for oil prices Brent Crude by about 4.6 percent to $35.74, a figure coming in as the lowest of the Benchmark since May. The United States benchmark, the West Texas Intermediate (WTI) to $33.64 dollars managing off a 6% dip. Following these dips, Reuters reported that Stephen Brennock of oil broker PVM noted that the “Near-term oil fundamentals will continue to deteriorate until the unprecedented rise in COVID infections is brought under control.”
The impacts of the coronavirus pandemic and the lockdowns it ushers in are quite profound on the oil markets as the indoor bound masses has no need for oil to power their cars and other automobiles while the industries which are forced to either close operations or to limit them will also have reduced demand for oil products. This impact on the macro scale and this plunged oil price as reported by Coinspeaker to as low as $0 back in April, sending the West Texas Intermediate Futures to a 300% collapse.
While this much dip may not happen with this second wave of the virus, the Organization of Petroleum Exporting Countries (OPEC) expects the global demand for oil to drop by about 10% this year to an average of 90 million barrels per day. Oil companies have also backed this decline with Vitol projecting winter demand to be about 96 million barrels per day (bpd) while Trafigura expects demand to fall to 92 million bpd or below.
OPEC+ Expected to Move to Prevent Oil Price Crash
As the oil price continues to dip following the effect of the coronavirus and the U.S. elections this week, many expect OPEC and its allied bodies to make policy moves to help prevent the complete collapse of the oil markets. Among the moves expected is a collective reduction in the total output to prevent market saturation which will further affect pricing.
OPEC+ currently has a target to cut daily output by as much as 7.7 million barrels per day and with a policy meeting billed for Nov 30th and Dec 1st, the body is expected to state a position that will further strengthen the oil price and the global markets in line with the current realities.
Eugen Weinberg, an analyst at Commerzbank AG (ETR: CBK) noted that “a resolute and coordinated announcement and action by OPEC+ are what is really needed to prevent any further price slide.”
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