Lagos — Experts say the oversupplied oil market will not start to return to normalcy until around third and fourth quarters of this year.
Oil prices have crashed since the outbreak of the coronavirus late last year in China. The market has again suffered glut leading to shortages of storage, leading to further relapse in Brent.
Hope went up with the OPEC+ new agreement back in March, however, the 9.7 million barrels per day cuts came too late to save prices from further tumbling.
Now, experts say prices market won’t rebalance until the last half of 2020.
According to Mohamed Arkab, Energy Minister of OPEC’s rotating president Algeria, oil prices will hit $40 per barrel at the quarter of the year.
International Brent as at Sunday traded at $26.62 per barrel.
He explained that oil prices may recover faster than expected post coronavirus pandemic, adding that there would be a gradual lifting of lockdowns around the world in the second half of the year.
“Together with the 9.7 million bpd cuts, OPEC and its allies pledged for May and June, these factors are set to lift the price of oil in H2 2020” Arkab said.
Mr. Arkab pointed that China which is now recovering from the pandemic and has lifted the lockdown“is driving up global demand.
On his part, Chief Investment Officer at UBS Global Wealth Management, Mark Haefele agreed that the market will reach balance in third quarter but said it will not become under supplied until the fourth quarter of the year as lockdown restrictions are eased and oil demand picks up.
“We forecast Brent to recover to $43 a barrel by year-end,” Haefele said.
An increase to $43 per barrel for Brent would represent a gain of around 115 percent from its currently price.
May contract expired, meaning traders had to pay people to take the oil off their hands due to low demand.
Some African countries are starting to reopen- Ghana, Madagascar and Nigeria have relaxed the lock down.
Some US states, including Oklahoma have also started reopening their economies last week, and several others have started lifting stay-at-home orders, likely boosting economic activity and oil consumption in the coming weeks.
Chief Market Analyst at Avatrade, Naeem Aslam, said: “Overall, I do contemplate that fundamentals are improving to a small extent because the US shale oil rig count has dropped vividly over the last week, and it is bound to have a positive influence on supply.
“As for the demand side, I reason we have hit the bottom. This is because, with the easing global lockdown measures, it is only a matter of time when we will start witnessing the demand equation showing more signs of life”, he told Reuters in an interview.