Oil prices dropping suddenly
The prices of May futures for Brent oil have declined by 2.7% to $51.62 per dollar on the ICE Exchange in London for the first time since the early December 2016. The April futures for WTI oil fell to $48.88 per barrel at the New York Mercantile Exchange (NYMEX).
This morning, the prices of May futures for Brent oil have risen by 0.83% to $53.55 per dollar as of 08:42 (MSK), while the April futures for WTI oil gained $0.64% and reached $50.59 per barrel.
British analysts believe that the current sharp drop in prices can be explained by the fact that traders stopped betting on further growth of quotations. Oil prices have begun falling after the last publication of the US Energy Ministry on commercial oil reserves, which grew by 8.22 million barrels per weeks vs. the estimated 1.97 million.
The director of the Center for Studies of World Energy Markets at the RAS Institute of Energy Research, Vyacheslav Kulagin, told Vestnik Kavkaza that the drop in futures by $4 per barrel was caused by a number of reasons. "The market reacts to the current situation, in particular, to statistical data - on the reduction of oil output in the OPEC countries and the growth of commercial oil reserves in the US. That is, the surplus of oil in the market still remains," he explained.
"There is a standard situation: as soon as there is information on the growth of reserves in the US, it has a downward effect on oil prices, and vice versa - yesterday and today there were several information events at once. It is expected that the market will play this information, so a certain balance will be reached soon. In any case, a significant collapse is not expected," Vyacheslav Kulagin is confident.
According to him, the seasonal factor will come into force now. "Everything will depend on how quickly winter will change for the summer and how demand will react to it, how quickly and dynamically promises to cut oil production in OPEC and other exporting countries will be implemented, as well as how the recovery of unconventional oil production will develop in the USA and Canada," the director of the Center for Studies of World Energy Markets at the RAS Institute of Energy Research stressed.
According to the deputy director of energy policy of the Institute of Energy and Finances, Alexey Belogoriev, in current conditions, oil can freely fluctuate between $48 and $58 per barrel under the influence of the conjuncture. Among the factors which caused the decline in quotations, in addition to the sharp increase in commercial oil reserves in the US, he named the US plans to expand crude export capacity along the Gulf of Mexico. "At the same time, I think that the main reasons are a planned decline in prices before the release of new OPEC statistics on oil production and the desire of traders to take a pause in assessing the effectiveness of reducing oil production by all parties to the agreement," he said.
"So far, nothing speaks in favor of the fact that the market is taking a turn in the direction of lower prices.The movement of quotes is within the context of the average annual prices around $55 per barrel. It would be worse if there was no volatility, because it would be an indicator of the unnatural market and evidence that some shocks are possible in the future," Alexei Belogoriev concluded.