When news of how potentially devastating COVID-19 could be started spreading in February 2020, oil prices were at $53/barrel. This was prior to the OPEC+ price war between Russia and Saudi Arabia that occurred in March and resulted in Saudi Arabia drastically increasing oil production after Russia refused to reduce output. We all know that COVID-19 and the OPEC+ price war eventually ended up attributing to NYMEX crude oil prices trading negatively in April, but here we are back at $52.60/barrel at writing. Now what?
Oil prices are edging slightly higher today on very light holiday trading volume, but the question is: have prices risen too far too fast?
As expected, it appears the OPEC+ group (includes Russia) will delay its forecasted January oil production hike by 3 months, according to sources who’ve spoken with Algeria’s energy minister Abdelmadjid Attar. This is contingent upon agreement at tomorrow’s meeting. No official announcement has been made. Currently January WTI futures are trading lower by $0.81 to $44.72/barrel as a classic “buy the rumor, sell the fact” scenario may be playing out.
The US election is a mere 3 weeks away and most experts agree that oil will remain on steady ground until after the election is decided. Covid-19, renewables, and consumer behaviors have brought crude to the brink several times since March. The US Shale industry has been forced to endure the worst market conditions in crude history over the past 6 months. Most recently, crude has spiked and leveled off several times in the last couple weeks, but analysts believe it should remain trading between $40-$43/bbl through the election.