The rise in oil prices was dangerous for the world: State Economy: Economy:

The fragile oil world achieved after the end of the price war and the restoration of the OPEC + agreement will be in jeopardy once the price of raw materials reaches a critical level of $ 40 per barrel. This was warned by analysts at IHS Markit.

The decline in oil demand in the spring of 2020 against the backdrop of the coronavirus pandemic, the collapse of the first OPEC + deal between Russia and Saudi Arabia in March, and the ensuing price war between Moscow and Riyadh, sharply collapsed the cost of raw materials. In April, the deal between the oil powers was restored, but the excess of cheap oil that formed on the market and the resulting shortage of storage space continued to put pressure on quotes. As a result, in April, the price of oil in the short term even fell to negative values.

Due to low oil prices, most medium and small shale producers in the United States are on the verge of bankruptcy. Oil production for them has become simply unprofitable. A decrease in production due to a decrease in the number of players in the market, as well as the entry into force of a new OPEC + transaction, led to the fact that the price of Brent crude recovered above $ 30 per barrel.

However, once the price of oil reaches $ 40 again, the commodity market will again be in danger of destabilization. On the one hand, American shale producers that are not part of the OPEC + deal will begin to return to it. On the other hand, Russia and Saudi Arabia, which have taken the biggest reductions in the framework of the deal of the oil powers, will have to raise production from reserve capacities.

“The focus will again be on compliance with the agreement to reduce oil production,” analysts say. Russia, Saudi Arabia and other OPEC + participants will again be faced with a choice whether to cut production further to maintain prices. “Their decision will be critical [для рынка]. In 2016, Saudi Arabia went to reduce production as a temporary measure, but ultimately ended up in a vicious circle of reductions. [необходимых для поддержания спроса]”, – said the agency’s analysts.

As expected at IHS Markit, oil demand could return to the level it had before the pandemic in the second half of 2021. This option is possible if the second wave of coronavirus does not follow.

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