Although Trump’s tariff threat and his Twitter showoff urging Saudi Arabia to cooperate with Russia in reducing OPEC Plus oil supply were accompanied by OPEC Plus agreement to cut output, the oil market is still sluggish and even the International Energy Agency has warned that declining production cannot offset the consequences of declining demand due to corona’s global epidemic.

The International Energy Agency predicts that global oil demand will fall to its lowest level in 25 years in April. Now the question is what is the outlook for the global oil market and oil prices? Will the fragile market conditions of the oil market continue? Can these questions be answered clearly now?

Currently, the global crude oil market is affected by several important factors, including the state of production of substitutes for crude oil; the growth of technologies related to the possibility of commercialization of potential substitute fuels; conditions of global recession or prosperity in 3 months, 6 month and 12 month time span ahead; the US presidential election and the winner’s approach to the energy; the outbreak of the coronavirus and the associated economic downturn; new developments in the Middle East, especially in Iraq, and tensions in the Persian Gulf and the changing value of OPEC Plus for Russia.

Each of these factors affects expectations about the amount of supply and demand on a given time horizon. Given the time span of at least a few months for the corona vaccine to be discovered, it seems that the increase in demand for summer travel this year is not enough to have an impact on the market, i.e. the amount of future demand and feedback.

The future picture of the oil market is highly dependent on the cross-sectional effects of the aforementioned factors, and if we ignore surprises other than the elements of each of these factors then in the context of global oil demand, the corona epidemic has the greatest impact on future demand. It is very unlikely that global oil demand will remain low during the next three months. Although low oil prices are a good opportunity to increase strategic reserves for emerging oil-dependent economies in their manufacturing sectors, countries such as India, China, South Korea, Japan, the Netherlands and Germany can apply for oil for such aims. China’s crude oil import value is more than 20 per cent of global crude oil imports.

Therefore, the timing of China’s definitive control of the corona crisis and the repercussions of its recessionary consequences could be a stimulus for the global oil market and increased demand. However, countries with trade ties with China or supply chain relations are still embroiled in a crisis over the corona epidemic, which could slow a shift in China’s oil imports. However, the opportunity to maintain strategic stocks during the low oil price period is also a factor in preventing further oil price cuts over a period of 3 to 6 months. But such a scenario depends on the process of controlling or cutting off the coronavirus transmission chain in these countries (especially accuracy of China’s statistics). From a demand perspective, the likelihood of a significant increase in demand during the first three months is very low and during the first six months is little.

On the supply side, the possibility of military tensions and cross-cutting or more political confrontation, on the one hand, affects Putin’s achievement of cooperating with OPEC Plus and Russia’s assessment of its influence in the global oil market compared to the influence, goal and approach of US foreign policy. On the other hand, maintaining the existing agreement on output cut or increase in the likelihood of a sharp decline will affect supply. Trump has been criticized for his performance in the corona crisis and given the negative impact of low oil prices on the state of US oil companies and related employment, it is likely that Trump this time instead of trying to reach an output cut deal will count on creating tension in the Persian Gulf and Iraq.

Of course, Trump is not worried about the Middle East oil, but this stimulus of expectations over the possibility of a drop in supply from the upward price stimulus channel will improve the situation of shale oil production in the United States. In terms of assessing the value of adherence to the OPEC Plus agreement with Russia, if the demand for strategic reserves is high enough to make a unilateral approach in attracting clients and bypassing OPEC look like useful then the supply deal is likely to break before big players; but this approach carries a high risk at the cost of a sharper drop in oil prices, which in the current price range, the probability of accepting this risk is not very high.

The overall supply and demand conditions, especially in terms of expectations for future supply and demand, mean that exporting countries are willing to keep the current situation afloat and prevent further price falls and the likelihood of a significant increase in oil prices. However, these statements are based on the above assumptions and the current state of the variables, and unexpected events may occur.