The current situation in the oil market and what analysts expect

The Brent crude oil the stock market fell for the fourth consecutive day. This marks the worst downward streak of the year, on the eve of the meeting to be held by the countries of the OPEC. Crude oil producers will have to decide how to ease supply constraints after the explosive price performance at the start of the year and the unilateral cuts implemented by Saudi Arabia.

The collapse of the market caused by the coronavirus forced this measure, but now it is time to make a move given the new expectations of recovery.

Before the meeting, Saudi Arabia urged the members of the OPEC to follow a cautious approach and not to unleash supply, which could put further downward pressure on prices.

The OPEC still has plenty of room to increase production; however, what will ultimately happen will depend on the balance of power between the Saudis and Russians, whose vision is always at odds with each other.

Analysts' view and supply

• The opposition of Russia to restrict supply is one focus of the debate. However, the latest drop in prices "may help to strengthen the Saudi position," warns Stephen Innes, chief market strategist at Axi.
• But the debate is intense. Moreover, investors "are not sure that OPEC will continue the support they have given over the past few months" by cutting supply; notes Daniel Hynes, strategist for Australia & New Zealand Banking Group.
• The most widespread view is that the OPEC production will increase by 500,000 barrels per day; according to analysts at CitiThis measure will take effect as of April.
• In this way, Saudi Arabia would end unilateral production cuts after sustained inventory drawdowns put upward pressure on prices.
• Given the high degree of uncertainty in the market, OPEC countries are likely to park their differences until April, they insist. CitiThe increased demand from refineries could accelerate the end of the restrictions.

The supercycle theory

Regardless of what the producing countries decide, there is speculation that crude oil prices will continue to move upwards in the long term. This has been dubbed the the supercycle theory.