What will happen to oil in 2020

2024 Author: James Gerald | [email protected]. Last modified: 2023-12-17 14:00

After the approximate deadlines for the end of the quarantine, the question of what will happen to the oil is the most burning one. We studied the latest news and expert opinions on what to expect in 2020.

What Happens to Black Gold Prices

In March 2020, the opinions of financial experts of American banks were reduced to the fact that the current situation with oil in the world would last not days or weeks, but several months. But American analysts could not reliably predict what would happen to the previously demanded product. In March, a trade war broke out between Russia, Saudi Arabia and the United States.

B. McNally, founder of a consulting firm focused on energy markets, drew an analogy between the beginning of the Great Depression in the last century and the current situation. However, in reality, such a comparison is inappropriate. Unless, if we compare the two situations in the price drop of oil.

What is happening in the world is unique in terms of a combination of factors, each of which can change at any time. The main problem, due to which it is not always possible to make predictions, is precisely such a combination that has never happened before. It is useless to draw analogies to the historical past.

1. In addition to the main triangle (Americans, Saudis and Russians), there are other countries participating in the oil market. Oil production is growing not only due to the main members of the trade and industrial opposition, there are also small players who are not taken into account in mutual claims. Supply far outstrips demand, even amid Iran’s announced cuts due to the alarming pandemic.
2. Due to the continued production of oil, there was a sharp lack of demand. In addition, the decline in interest in fuel was due to the global pandemic. Transport, tourism, export and import - all the main areas where fuel consumption took place are "on pause". Due to the quarantine introduced by many countries, there is not even the previous communication between the regions, the movement of transport within large cities.
3. The Americans are confident that the situation is developing due to the absence of a so-called stabilizing manufacturer. But it is known from experience already that they usually consider their companies as such, regardless of their location on the planet.

S. Suvorov, a leading analyst at BCS Premier, was confident in March that prices in 2020 would stabilize as soon as the global pandemic subsided. M. Nechaev assured RBC journalists that the price range is unlikely to be below $ 30-20. The opinion of an expert from the United States, Chris Weafer, admitted that prices would fall to the level of 2016 and for several months.

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What can you expect this year

Even the World Bank does not know what will happen to the strategic product. Some experts are of the opinion that oil production in the United States will continue in the same volume, and new pipelines will still be built. TASS quoted the World Bank report, which indicates that America will face economic and political problems if they do not change the tactics of economic development.

However, there are no special assumptions about what will happen to oil. The main hopes are pinned on a decline in tensions between China and the United States. Now it is difficult to envisage an end to trade wars amid mutual accusations and to count on such a pastoral scenario. China recently bought a large shipment of black gold at a bargain price from Russia.

According to S. Alikhashkin, an expert of the RT TEK Institute, in 2020 Russia will have the same problems as before. It will have to continue import substitution and resist the emerging rise in the cost of oil production.

However, he is confident that the global scenario, even after the end of the pandemic and the resumption of all previous exchanges and settlements, can only follow two strategic directions:

1. The first thing that is likely to happen with oil, but not in 2020, but in the next decade, is the end of its role as the world's main energy source. There are assumptions that oil production companies will have to rebuild, introduce new technologies, and sell not raw materials, but some intermediate or final product. Subject to investments in such projects by the state or investors, decarbonization of the Russian economy and a surge in the growth of new technologies will occur.
2. The second option, no less probable, is an increase in oil demand after the end of the current extreme situation. According to forecasts, the rate of growth in prices for it will be much lower than before. And with all the positive aspects, this will mean the previous dependence of the ruble on the value of black gold.

Earlier, more general views were expressed about the current situation. Economists are confident that the modern world will not return to a carefully built global economy. Even tourism will be predominantly domestic. The countries will try to produce most of the strategic products on their own, so as not to depend on partners in any such situation, reminiscent of the current one due to the pandemic.

Summarize

1. Experts are confident that the situation in the oil industry is not as catastrophic as it seems to the uninitiated.
2. The main problem is the restriction of transportation due to the coronavirus.
3. The fall in oil prices is the result of trade wars between key players.
4. No one has confident predictions because the situation is unique.
5. Deglobalization of economic ties between countries also plays a role.