Oil is in trouble.. Big weekly downturn and expectations for further decline
Oil in trouble.. Big weekly downturn and expectations for the further decline:
World crude oil prices have declined throughout this week,
continuing their correction from the previous week, following an increase in the confirmed cases of Covid-19,
especially from the Delta variant, which has sparked speculation that global demand will take longer to recover.
On Friday, oil prices rose by 0.2% for both Brent oil, the benchmark for Europe, to the US $73.59 per barrel,
and West Texas Intermediate oil, which became the benchmark for the United States, to the US $71.81.
Evest follows updates in the commodity trading market last week,
and this week in the following lines.
Negative weekly performance
Brent fell 2.6% on a weekly basis, while West Texas Intermediate fell 3.7%.
This week’s correction continues at a disadvantage last week for two types of black gold, respectively at -2.7% and -2.95%.
This week, the oil decline is the biggest weekly decline since March.
Actually, oil prices were boosted on Tuesday after a new wave of the Covid 19 virus emerged in many countries,
including India and Indonesia, sparking speculation that the global economic recovery will falter, affecting oil demand.
However, the situation reversed on Wednesday after Reuters reported that Saudi Arabia and the UAE agreed
at the OPEC+ meeting to supply more oil given the expectation of a global economic recovery
and to prevent price hikes that hurt the market.
the Petroleum Exporting Countries (OPEC)
OPEC+ is made up of the member countries of the Organization
of the Petroleum Exporting Countries (OPEC), Russia, and its allies.
They are currently meeting to discuss the need to extend production cuts of 9.7 million barrels per day until the end of 2022.
The correction in oil prices continued after the United Kingdom reported a rise in Covid-19 cases, reaching 56674 on Friday,
the highest in the world, prevailing over Indonesia, where the increase in additional cases on that day was high at 51952.
In its forecast for 2022 released on Friday, OPEC estimated that world oil demand would gradually recover in the second half of next year,
with consumption reaching 100 million barrels per day.
Driving the increase in demand for oil will start from the U.S., China, and India markets.
Developing economies are expected to grow at 1.8 million barrels per day next year.
However, the price of the world’s major energy commodity continues to post a good price increase,
reaching 44.3% for Brent and 55% for WTI.
The increase followed expectations of a recovery in the world economy that would revive transport activities.
To date, the transport sector has absorbed 89% of oil consumption, both for passenger cars, ships, and aircraft.
What happened at the last session?
During the last session of last week, brokers appeared to adjust their positions after the losses of previous days,
with the price of Brent and West Texas Intermediate gaining some strength.
Analysts pointed out that “after several declines, it is customary to see an attempt to rebound.”
But during the week, the barrel of Brent and West Texas crude fell by large and varying proportions.”
The key question for investors is whether the talks between Saudi Arabia
and the Emirates will lead to more oil production immediately or not.
In addition, the Cofid- 19 virus and delta variant updates are certainly negative for the market and oil demand.
The level of supply from the Organization of Petroleum Exporting Countries (OPEC) and its allies through the OPEC + agreement,
which begins next month, remains uncertain: Despite some ups and downs on Thursday,
the negotiations have not been formally completed and nothing has been agreed upon.
According to analysts, “the latest news suggests that the talks are going in the right direction
for OPEC and in the wrong direction for prices.”
In the event of acquiescing to the UAE’s desire to increase daily oil production,
this would mean dumping markets with UAE oil,
while the market could also see entry into Iranian oil,
should a new nuclear agreement be reached between the United States and Iran.
Negotiations are supposed to resume very soon,
to indicate whether an agreement will really be reached
or whether sanctions will remain in place between the government of Raisi’s government and Joe Biden,
as was the case between Trump and Rouhani.
China’s oil imports declined 3% during the first half of the year
In addition, the news that China’s oil imports declined in the first six months of this year for the first time since 2013,
also put downward pressure on crude oil prices.
According to Reuters, China’s crude oil imports in the first six months of the year amounted to 260.66 million tons, down 3% on an annual basis.
June imports were around 9.77 million barrels per day, below the June record of 12.9 million barrels per day,
as refineries boosted cheap oil production to provide the Chinese market with rapid recovery after the Kofid-19 pandemic.
This year, OPEC expects world oil demand to increase by 6 million barrels per day, unchanged from last month’s estimates.
The increase in COVID-19 cases related to the delta variant could lead to travel blockades
and restrictions that reduce recent positive demand expectations.
According to Reuters, Los Angeles in the United States of America reinstated the mask-wearing rule this weekend.
The outlook for selling oil prices next week is still not positive when demand is showing signs of slowing.
Oil in trouble.. Big weekly downturn and expectations for further decline