Market correction sees oil prices fall

"The prices of oil have been rising and rising and rising over the last couple of weeks. Although there is reason for the higher levels, a constant increase is not sustainable or justified.

The market situation is definitely better than a few weeks ago, supply has been curtailed significantly one way or another and demand has also started to recover.

But that doesn’t mean that the market is still not stretched and that it is suddenly balanced. Oil production is still above demand levels and there is a lot of uncertainty about the future of how the Covid-19 pandemic will evolve.

A second wave is not such a remote possibility and a new round of lockdowns could send prices back to much lower levels very quickly, and the market knows it.

Therefore lower prices this morning are not a surprise, and they are not necessarily the result of a market event, they are rather a correction of the consecutive boosts that oil has seen over the last days.

As we have said, we see oil stabilising now between US$30 and US$35/bbl for a while, with a potential for higher prices in the 40s only later in the year when and if demand strengthens and approaches pre-Covid-19 levels.

Prices will divert a little bit from this range depending on the day and on bullish or bearish indications, but that’s the level that they will move around for a while.

Yesterday prices reached a bit above their current weight, but today’s drop doesn’t necessarily mean that they are moving downhill from now on."

Read the article online at: https://www.oilfieldtechnology.com/special-reports/22052020/market-correction-sees-oil-prices-fall/