Oil prices are expected to drop to zero in the near future but rebound in the first half of 2021, media reports said. According to an analysis by Saxo Bank, Brent prices will range anywhere between $50 and $75 per barrel.
Analysts believe that crude prices could hit sub-zero levels if supply and demand are affected. The current slowdown in demand owing to the Cover-19 pandemic has increased oil supply at levels never seen before.
Ole Hansen, head of commodity strategy at Saxo Bank, told the media, “The short-term outlook for oil looks bleak, which is especially concerning for Mena economies that depend heavily on oil revenues. There is a risk of WTI crude falling back towards $0 per barrel and Brent towards $10 a barrel, but in the long term we believe the outlook is positive.”
A recent report from Morgan Stanley notes that oil demand will not return to normal until the end of 2021. Although the WTI crude prices are expected to stabilise in the first half of next year, Brent crude be around $45 per barrel.
According to the International Energy Agency’s (IEA) latest report, low demand because of the pandemic could result in a stock build up of 12 million barrels per day in the first half of 2020. Storage is also becoming a concern because extracted oil requires to be stored in suitable conditions. The industry globally is facing challenges while trying to balance supply and demand. It is anticipated that the oil market might test the global storage capacity in the coming three to four weeks.