Is the price of oil set to fall to $60 a barrel?

(Partial video transcript)

Getting the low-down on oil

Both Brent and US crude oil have been trading around the $80 to $85 a barrel level in August, although Brent hit $87 on 10 August and US crude also went up to $84 the same date, driven by increasing signs of a tightening market. However, demand concerns in China have also weighed on crude prices more recently, as investors consider the impact on oil in the world's second-largest economy.

AB: Let's go live now to energy and economic analyst Osama Rizvi in Lahore for more on this. Now, Osama, you are somebody who certainly keeps across the oil market, and there's a lot to go through at the moment, so I'm going to try and ask some of the questions that our investors and traders might be interested in.

Firstly, Osama, EIA weekly data showed on Wednesday that US oil production remained for a second week at 12.8 million barrels per day, which is the highest it's been since March 2020. Now, Baker Hughes' weekly oil rig count shows an almost constant decline in the number of oil and gas rigs in operation since the start of the year.

So, in numbers, producing US oil rigs in March 2020, around 680. Producing US oil rigs in August 2023 at 512, yet producing the same amount of crude oil. So, what do you make of this data, Osama?

OR: Thank you so much, Angela. I think it's a very interesting question, and you have to look at it from a different perspective. So, there are three or four main reasons for this. First of all, we all know that this year has been quite good for the big oil or the oil producers in that they registered record profits recently in the previous year. So, higher oil prices certainly have incentivised oil producers to produce more.

However, as you mentioned, this is happening with a reduced number of rigs, which is primarily because well productivity has gone up recently due to technological improvements, and also because of the recent learnings from the oil price war and how to keep afloat during the lower oil price time period. So, that is the first thing.

Secondly, drills, but uncompleted wells, the ducts, they have gone up. The number of ducts going up has also been one of the contributing factors to this. And thirdly, refracts. So, you know that there is a lot of focus right now on environmentally friendly technology and environmentally friendly ways, all the while keeping oil production and oil supply the same.

So, refracts come to the rescue, and the amount of refracts and the oil being recovered from refracts, those have also gone up. So, these are the four or five reasons primarily contributing to the increased or sustained oil supply, despite a fall in oil rigs.

Psychological $90 mark

AB: And, Osama, you and I have talked a lot about oil prices in the past. Is it going to hit $90 at times? Is it going to reach $100, go over $100? You know, my thoughts are that we're at this $80 to $85 a barrel level in August, as we were talking about as well. But what are your thoughts on oil prices in the short and the longer term?

OR: Well, Angela, you know that I have remained a bear throughout the start of this year. And I mean, I know there have been some spikes, some extraordinary swings to the upside in the oil prices. But we saw that despite this recent rally, oil prices failed to break the $90 psychological mark.

And now, so there is this physical market, and then there are paper markets. When you talk about fundamentals, and I'm going to talk about fundamentals for now, you see that all the fundamentals, all the major global economic indicators that are significant contributors to our perspective demand increase, they're all down. They're down to extraordinary levels.