Oil traders braced for another week of market turmoil
Oil traders are braced for another week of rollercoaster prices as the global industry tries to recover from the crisis of oversupply in energy markets. Prices of Brent crude and West Texas Intermediate, the Middle East and US standards, pulled back from the lowest levels in their history at the end of last week, with WTI even hitting negative territory.
Traders are expecting further volatility when markets reopen today. “On a fundamental basis, prices should come off again. There is too much oil being produced and not enough demand,” Matt Stanley, senior broker in Dubai with global trading firm Starfuels, told Arab News. He expected Brent futures prices to come under big pressure this week. Analysts are still worried that the big cuts by the OPEC+ alliance, led by Saudi Arabia and Russia, due to come into effect this week will take a long time to drain the glut of oil in the world as coronavirus lockdowns continue to hit demand.
“We’ve entered the inflection phase where the rebalancing has started, but this period could take four to eight weeks to resolve,” said Jeffrey Currie, chief commodity strategist at Goldman Sachs.
Other factors will keep oil in the headlines in the runup to the OPEC+ cuts. US shale producers, particularly hard hit by low prices, are closing costly operations, with a big loss of revenue and jobs.
US Treasury Secretary Steven Mnuchin said at the weekend he was considering a government support package for the crippled US industry, but there are doubts that the proposals can obtain congressional approval. Tension is also rising in the US over a big shipment of oil from Saudi Arabia, bought and paid for by American customers and due to be delivered over the next few weeks.