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AxiCorp’s outlook for global oil markets
Brent crude prices have risen by 14 per cent this week and continued to rise in morning trade, eagerly waiting for the expected OPEC+ meeting that will take place tomorrow. The meeting will see the world’s major oil producers discuss extended production cuts. Stephen Innes, Global Chief Markets Strategist at AxiCorp joins CNBC Africa for more.
Fri, 05 Jun 2020 11:04:40 GMT
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AI Generated Summary
- The delay in reaching a consensus on production cuts was attributed to the issue of non-compliance by countries like Iraq and Nigeria.
- Innes highlighted efforts by Saudi Arabia and Russia to ensure better compliance among all members to stabilize oil prices.
- The transition towards green energy and electric vehicles may lead to a sustained period of lower oil prices, potentially between $40 and $50.
Brent crude prices have surged by 14 per cent this week as the world eagerly awaits the OPEC+ meeting set for tomorrow. The meeting, which will see major oil producers discussing extended production cuts, has been a focal point for market players and analysts alike. Stephen Innes, Global Chief Markets Strategist at AxiCorp, joined CNBC Africa to provide his insights on the current situation in the oil market. The delay in reaching a consensus on production cuts was attributed to the longstanding issue of non-compliance by countries like Iraq and Nigeria. Innes highlighted the efforts by Saudi Arabia and Russia to ensure better compliance among all members to stabilize oil prices. Despite the uncertainties leading up to the meeting, the market sentiment appeared positive with prices moving higher in anticipation of a possible agreement. In terms of price targets, Innes mentioned a range of $40 to $50 as the desired band for oil producers, underscoring the need to breach the $40 level convincingly. However, the return of US producers could pose a challenge if prices continue to climb. The issue of non-compliance among certain OPEC members, particularly Russia in the past, has been a persistent challenge. With storage tanks nearing capacity and demand still recovering from the impact of COVID-19, there is a heightened focus on ensuring commitment from all parties. Despite the historical tendencies of non-compliance, Innes suggested that the current circumstances might lead to more serious efforts to uphold the agreement. Reflecting on the unprecedented events that unfolded earlier this year, including negative oil prices, Innes expressed confidence in the risk management mechanisms in place to prevent a recurrence of such extreme price fluctuations. Looking ahead, he emphasized the changing landscape of the energy sector, pointing towards a gradual shift towards green energy and electric vehicles. In his view, the future of oil may involve a sustained period of lower prices, potentially ranging between $40 and $50, aligning with OPEC's objectives for stability. As the global energy landscape evolves, stakeholders in the oil market will need to adapt to a new reality characterized by increased focus on sustainability and alternative energy sources.
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