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- Oil prices could fall below $ 20 for the first time since 2002 if an OPEC production reduction agreement cannot be reached, RBC Capital Markets strategist Helima Croft said on Thursday.
- A meeting Thursday between the world’s largest producers has “several landmines hiding just below the surface” that could spill over negotiations, she said in an interview with CNBC, including the precarious participation of the United States. and Russia’s hopes for a broad cut from Saudi Arabia.
- Even if the meeting results in lower pumping activity, oil prices will not fully rebound until the coronavirus pandemic subsides and demand rebounds, said Croft.
- Watch the Brent Crude Oil Trade live here.
The price of oil is dependent on fragile negotiations between the world’s largest producers – and failure to reach an agreement could bring the product below $ 20 a barrel, an RBC Capital Markets strategist said on Thursday.
OPEC, Russia and other producers are expected to enter into talks at a webinar on Thursday, opening the first opportunity for a major de-escalation in the oil price war.
Helima Croft, head of global commodity strategy at RBC, Helima Croft, head of global commodity strategy, said Helima Croft, said the cooperation should protect the market from further loss.
“We warn that the situation remains extremely fluid and that several landmines are hiding just below the surface that could still explode negotiations at the 11th hour,” Croft wrote in a research note Thursday.
President Donald Trump has suggested that the coalition cut production from 10 million to 15 million barrels, although the White House has not promised to join other countries in reducing oil production. Russia could demand an unreasonably large cut from Saudi Arabia, the strategist added.
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Even logistical problems surrounding the format of the meeting could jeopardize an agreement. The Iranian oil minister challenged the format of the 35-country webinar in a letter Wednesday to the OPEC secretary general. Coalition decisions require consensus, and while the country likely wants to avoid negotiating a deal, it still represents uncertainty before negotiations, said Croft.
The most traded product in the world has rebounded from its lows at the end of March, but the historical weakness of demand in a context of global blocking of coronaviruses continues to weigh on its price. Failed talks could put even more pressure on oil and push prices below $ 20 a barrel for the first time in 18 years, Croft told CNBC in an interview on Thursday.
Even with an agreed drop in production, oil has been on the brink of low prices for a decade until the coronavirus pandemic subsides, added Croft.
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“I think this agreement is important to turn off the taps and allow for a potential recovery,” she said. “But we will not get a rapid rebound in prices anyway, due to the real demand destruction that we see because of the coronavirus.”
The price dispute started in early March when Russia refused to slow production at a previous OPEC + meeting. Saudi Arabia responded by reducing its official selling price for oil and increasing production in an attempt to steal market share from its rival. The continued escalation of the fight against raw materials has lowered the price of oil by more than 50% and has led to other risky markets in the world.
Brent crude has traded 1.7% to $ 33.41 per barrel at 11 pm ET 13, while West Texas Intermediate has traded about 2.3% to $ 25.67.
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