Oil prices have now reached an interim stage of recovery.
That’s according to Rystad Energy’s Head of Oil Markets Bjornar Tonhaugen, who outlined that prices will fluctuate around the $40 mark “for a while” and that “huge deviations” would not be likely.
Further gains to levels of $45-50 would not be justified at this stage as there are still valid concerns on the demand side, Tonhaugen highlighted.
“The pandemic has not disappeared, it’s tiring for many to refer to Covid-19 again and again, but the reality demands it,” Tonhaugen said in a statement sent to Rigzone on Monday.
“Infections are rising in key markets around the world and there are valid concerns that the world is in for a prolonged period of dealing with its consequences,” he added.
“If infections and hospitalizations rise even more and a second wave becomes a reality, the market will get depressed again with demand declining. Not as much as in the first half of the year though, as the extent of lockdowns that we have experienced was too painful to bare for many countries,” Tonhaugen continued.
The Rystad representative also highlighted that today is the day that Iraq must present its plan to get production down in line with its OPEC+ targets. Tonhaugen warned that patience by Riyadh and Moscow is running thin and said the market will be watching the reactions to Iraq’s plans in the coming days.
“If OPEC+ sees that it cannot trust the members of the alliance, it’s not for granted that the deal will be maintained. What if it gets scrapped?” Tonhaugen said.
“With everything else stable (demand), if compliance plans that are put on the table are trustworthy and commitments are kept, we can expect prices to move between $40 and $45 maximum before the next OPEC+ meeting, which will be another benchmark event,” Tonhaugen added.