— This is the script of CNBC's news report for China's CCTV on June 10, 2020, Wednesday.
Despite the recent rise in international oil prices, the major investment Banks are starting to warn of downside risks. The Goldman Sachs research team said on Tuesday that oil prices could see a 15 to 20 percent correction in the coming weeks. Monday's small selling could be a sign that a correction has begun.
Goldman Sachs said the downside risks were mainly due to uncertainty on the demand side and excess inventories. Although Goldman Sachs announced that it will raise its 2020 oil price expectations, they are not willing to see more oil prices at this stage. The bank currently expects Brent oil prices to be US$40.40 per barrel and WTI oil prices to be US$36 per barrel, both of which are below Current trading price. A day earlier, Morgan Stanley, another big investment bank, warned that the oil price rally was unlikely to last long time. The bank's research team believes the recent rise in oil prices has been driven more by supply-side factors than demand, and it is unclear whether downstream refiners will be able to restore strong demand. For Qatar's energy minister, the possibility of a second wave is also a risk that cannot be ignored in the oil market.
He also said the price war waged was a huge mistake.
Saad Al-Kaabi
Qatari energy minister
I think it was a very big mistake XXXX You know, flooding the market is what caused us to go to a very low level. And then the pandemic basically took it almost to a very dangerous area where people could not afford to produce anymore. So, Demand is the biggest issue now.
Qatar became the first Middle Eastern country to leave OPEC in January 2019. After that Qatar has focused its efforts on plans to develop and increase gas production.
Qatar is also known as a small, wealthy country in the Middle East, thanks largely to its oil and gas reserves. But not all countries have been so lucky, such as Turkey. The recent oil and gas dispute between Turkey and Greece have made the Mediterranean tense, making it another focus of attention in the oil market.
Turkey's domestic oil and gas resources are relatively scarce, mainly dependent on imports. In 2016, data showed that its imports accounted for about 53% of domestic consumption, and Turkish domestic oil prices were also very unstable. The country adjusted oil prices 36 times in the two months during the outbreak, according to official data. To wean itself off oil imports, Turkey's national oil and Gas company has obtained licenses from the Turkish government. Seven of them are off the coast of Greece's main islands. That has provoked a furious response from Greece, whose foreign minister said on Monday it was ready to respond to any provocation by Turkey.
The issue is complicated by the importance of the Mediterranean's location, which involves the European Union, Russia and many others. The leaders of Greece and Cyprus are scheduled to visit Israel separately later this month to discuss the gas pipeline issue in the eastern Mediterranean. Markets expect tensions to rise further by then. We will keep an eye on this issue.