The price of oil clawed its way back up Tuesday: the WTI oil price gained 3% to settle around $24 per barrel.
Volatility is expected to continue as the coronavirus outbreak and slowdown in business add pressure to oil prices.
On Monday, Russian oil minister Alexander Novak was in discussions with Russian oil producers to see whether they think Russia should reignite discussions with OPEC on deeper cuts, Bjarne Schieldrop, chief commodities analyst at SEB, said in a note.
The fall in oil prices and further panic in the markets has been squeezing U.S. shale companies.
“U.S. shale oil production growth fueled by debt has been a major problem for both OPEC and Russia since the 2014/15 price collapse and the strong U.S. shale oil production rebound since 2016,” Schieldrop said.
The analyst questioned why Russia and OPEC would move in and save U.S. shale oil producers.
That factor was why the Russian oil producers decided they did not want to cut deeper in the second quarter of 2020, because it would mostly help U.S. shale oil players rather than Russian oil producers, Schieldrop said.
Oil Surplus Forecast In Q2
The market facing a tsunami of oil surplus in April, the analyst said.
"We are now looking at surplus in Q2 2020 at a scale that we have never seen before. It is not difficult to imagine that with no flights, people soon sitting at home and the industry close to shut down that demand could fall even more."
Oil Prices Fall To 17-Year Low, OPEC And IEA Warn Of 'Major Consequences' For Developing Countries
Oil Prices Rebound, Analyst Says Market Faces Tsunami Of Surplus
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