The oil price will change depending on the development of events at the oil market, said Reuters analyst.
The author of the article considers two scenarios of operation of the oil market. The first one, which is the most expected by the analysts and broker, is restoration of monopoly in OPEC by Saudi Arabia as soon as the country reaches its economic and geopolitical goals through reduction of oil prices.
The second variant of development of events is that the oil market will tend to normal operation, when the price will be mainly determined by extreme excess of production, but not the OPEC monopoly or a separate country. This variant could be considered less probable, because the author believes that the oil market was operating this way for almost two decades since 1986 till 2004.
A significant time is needed to implement both scenarios. “It is unlikely that Saudi Arabia will need only a couple of months to influence Iran and Russia or fully suspend development of the shelf oil in the US. It is also unlikely that the oil market could quickly switch from OPEC domination to the normal competitive market,” the author believes.
Irrespective of the scenario, we will have a certain range of prices and the question is whether the current price is $55.00-60.00 per barrel is closer to the upper or the lower edge of the range. The author believes with the competitive operation of the oil market the price will be between $20.00 and $50.00 and in case of restoration of OPEC monopoly – it will return to the price between $50.00 and $120.
