BRUSSELS (Pakistan Point News / Sputnik - 21st April, 2020) Samuele Furfari, a professor at the University of Brussels and a former longtime senior official on energy policy in the European Commission, told Sputnik on Tuesday that once countries resumed air traffic and lifted the introduced travel bans due to the COVID-19 pandemic, the current oil glut would eventually disappear, stocks would be reduced and fuel consumption would pick up again.
"Once the world starts turning again, after the worst of the pandemic later this year, the price of oil should come back to its reasonable price level, which is $30 to $50 per barrel. It is the equilibrium price for a fluid and dynamic market," Furfari said.
Following Monday's historic oil prices crash into negative territory reaching almost minus $40 per barrel at the New York Mercantile Exchange (NYMEX), the price of WTI crude has recovered and was trading at around $23 Dollars per barrel as of Tuesday.
The COVID-19 crisis has closed borders, shut down factories, grounded all commercial jets and left millions of people without jobs. That, combined with a failure of the OPEC+ talks in April, has led to an evolution of the global oil market.
MARKETS TO RETURN TO NORMAL AFTER PANDEMIC
OPEC+ countries, as well as oil producers from a wider G20 group of nations such as the US, Brazil and Canada, reached what many have called a historic agreement on April 12. The deal envisages a reduction in oil production by the OPEC+ group by 9.7 million barrels per day for two months starting on May 1, and possibly up to 15 million barrels per day with the G20 nations taken into account.
"What we see is indeed an unraveling of the OPEC as such. Russia, the US and Saudi Arabia are the super-producers, talking together now, to bring back the oil price to a level which makes extraction profitable enough, while permitting economic development," Furfari said.
He added that because of the crash in demand for petroleum products globally, the pricing strategy has been shattered, but it would not last for long.
"Neither Moscow nor Riyadh could imagine that the planes of all airlines in the world would remain on the tarmac of airports and that tourism would be stopped dead because of the COVID-19 pandemic. It is a great worry to all, but which should not last too long. Once air traffic picks up again, the oil glut that we see now will gradually disappear, as stocks are gradually reduced and consumption picks up again," Furfari noted.
Then, according to the professor, comes the gas fuel, whose market is rapidly developing.
"Gas can compete with oil (30 percent of gas is used for electricity production and 70 percent to produce heat). In transport, liquefied gas now competes with oil as a fuel. ...The new paradigm which has gradually appeared before the coronacrisis will continue to affirm its dominance, with a disappearance of the OPEC control, a lot of available oil and gas in the world, including in its liquefied version, and the much greater difficulty to make so-called 'renewable energies' profitable," Furfari stated.
The oil price fell sharply on the global markets in early March after the parties to the OPEC+ deal on output cuts failed to agree on the extension of the agreement past April 1. In addition, the uncertainty over the coronavirus pandemic and virus-linked restrictions, including massive air travel suspension, have wreaked havoc on the market.
