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OAPEC: Three possibilities for the future oil prices related to the interaction of supply and demand forces

11-10-2020

The General Secretariat of the Organization of Arab Petroleum Exporting Countries (OAPEC) said on Sunday that the future oil prices are moving according to the three possibilities that were linked to the overlap of demand and supply forces in the markets. This came in a specialized study published by OAPEC titled: Global Energy Security the reality, prospects, implications for energy markets and for member states. The study pointed out that the first possibility is the success of the gradual return to world economic activity, which means the gradual recovery of oil demand and the continuation of dialog and coordination between the OPEC Plus group in monitoring markets and strict compliance with production quotas. If this happens, it could lead to a gradual recovery of oil prices in world markets and a revival of investment in the oil industry to ensure a secure and stable supply of markets. However, it was added that the second possibility is that efforts to gradually return global economic activity will suffer a setback due to the expected second wave of COVID-19, which is expected to lead to the return of closures in several countries, new disruption of transportation and tourism, which may turn out to be another sharp decrease in oil demand. The study predicted that the second wave of COVID-19, that there will be a rapid response side and the OPEC Plus Group will succeed in rebalancing the markets through the agreement on the necessary reduction, its implementation and adherence until recovery returns to the markets. Also, it’s clear that the third possibility is launched under the same conditions that created the second possibility, but the alternative course that could take place is the failure of the supply side to enable OPEC Plus group and other producers to restore balance to the markets by agreeing on the necessary reduction implementing it and committing to it. This possibility, it occurs that it will lead to return to the 1980s crisis through the continuation of low prices and stagnation in investment activity. When the world economy recovers from its recession and oil demand resumes its growth, OPEC's excess production capacities will gradually disappear, then prices will rise to record levels and we will see another oil price boom, perhaps even more severe than the last one. This study has emphasized the importance of effective constructive dialog, partnership in the common vision and responsibility between producer and consumer countries, noting that the absence of this type of dialog was a direct cause of the crises of the 1970s and 180s that created the conditions for an era of record oil price hikes during the first decade of the third millennium.