Rebound in Oil prices and a decline in US crude oil inventories

انتعاش أسعار النفط وسط انخفاض المخزونات الأمريكية

Rebound in Oil prices and a decline in US crude oil inventories

Rebound in Oil prices and a decline in US crude oil inventories:

The American Petroleum Institute (API) announced yesterday,
Tuesday (January 26, 2021) that crude oil inventories declined
by 5.272 million barrels of US crude oil inventories for the week ending on 22
nd January.

Analysts expected a smaller inventory drawdown by 430,000 barrels this week.

In the last week ending on 15th January, the American Petroleum Institute announced an increase in oil inventories
by 2.562 million barrels, after analysts had expected a drawdown by 1.167 million barrels.

The US Energy Information Administration (EIA) recorded an increase of 4.4 million barrels.

Factors influence the Oil prices this week

Oil prices were traded lower on Tuesday just before the data issue. Because of China’s closure,
the current expectations of the International Energy Agency
(IEA) in association with the extent of the demand for oil,
global progress in spreading the Coronavirus vaccine has slowed.

The possibility of delaying or rolling back the next batch of stimulus payments to stimulate economic growth which
previously had been set by the new administration which said it would be paid immediately,
on the ground that all these factors affected oil prices.

Weekly US crude oil prices

In the hour before the American Petroleum Institute data issue on Tuesday,
West Texas Intermediate (WTI) crude fell by $ 0.27 per day (-0.51%) to $ 52.50, down by $ 0.80 since Wednesday last week.

The all-day-long Brent crude oil benchmark fell by $ 0.06 at that time (-0.11%) to $ 55.82 – downing by $ 0.70 over the course of the week.

Oil prices closed unevenly on Tuesday owing to the continued increase in coronavirus infections, raising concerns about the extent of fuel demand.

On Tuesday at 4:36 PM according to EDT, the WTI index was trading at $ 52.55, while Brent crude was trading at $ 55.87.

West Texas Intermediate crude for March delivery lost 16 cents and closed at $ 52.61 a barrel on the New York Mercantile Exchange.

Brent crude for March delivery rose 3 cents to close at 55.91 dollars a barrel on the ICE Futures Exchange.

Energy production rates

According to the latest data provided by the Energy Information Administration,
US oil production has remained steady at 11 million barrels per day for six consecutive weeks,
and there are no specific expectations for any rapid increase in production owing to the cautious move of the oil companies.

The American Petroleum Institute reported an increase in gasoline inventories by 3.058 million barrels,
in the week ending January 22 – compared to last week’s increase of 1.129 million barrels.

While analysts had expected, an increase of 1.764 million barrels for this week.

As for distillate stocks, they witnessed an increase of 1.398 million barrels for the week,
in addition to last week’s increase, which reached 816 thousand barrels, and Cushing stocks decreased by 3.475 million barrels.

Saudi Arabia’s aspirations to give up crude oil for domestic power generation.

Saudi Arabia is looking to generate energy with solar energy

“Argaam” a news magazine has quoted the Saudi Energy Minister, Prince Abdulaziz bin Salman,
as saying that the Kingdom of Saudi Arabia plans to replace the use of petroleum derivatives and move to generate energy with solar energy.

Prince Abdulaziz bin Salman also said in a meeting describing the Saudi energy program,
within the framework of the
“sustaining hydrocarbon demand” program, that the world’s largest oil exporter aims to replace the oil,
which is still burning to generate electricity, with solar energy.

“Argaam” indicated that “the program will be classified among the most important initiatives,
given its value for the national economy and its ability to stop the financial waste of the state.”

There is no doubt that generating electricity by solar energy instead of oil contributes to increasing the supply of oil to the Kingdom of Saudi Arabia.

It could also give it more influence over the global oil market and help it increase revenue from crude oil sales. 

Prince Abdulaziz bin Salman also indicated on Monday that Saudi Arabia had made “tremendous efforts” to strike balance in the oil market last year,
according to “Argaam” magazine.

Last year, Saudi Arabia entered a short oil price war and disagreed with Russia in March 2020
relating to how to manage oil supplies to the market at a time when demand collapsed due to the Coronavirus.

And after the Kingdom of Saudi Arabia and Russia were able to agree on negotiations and a new agreement for OPEC,
the two OPEC leaders had to reduce their production more than what had been discussed in March. 

As for this year, global demand for oil and the market remains unstable owing to the continuing spread of the Coronavirus,
and the Kingdom of Saudi Arabia has given up its insistence that everyone in OPEC should bear part of the burden until the state of balance returns to the oil market.

The Kingdom also announced a reduction in its production by one million barrels a day, from its crude oil production, in February and March.

Close the Libyan oil port

The oil port of Harika in eastern Libya was closed by the Petroleum Facilities Guard after the National Oil Corporation delayed paying the salaries of its members,
this is what the Libya Observer reported, and the wages of nearly 1,000 of its members were not paid a year ago.

In the last years, the Petroleum Facilities Guard has besieged all Libyan oil ports. Owing to this measure,
exports stopped until the Libyan National Army, along with a group affiliated with the government of eastern Libya,
seized the ports and handed them over to the National Oil Corporation.

Warnings about closing the Libyan oil port

KPC Chairman Mustafa Sanalla warned of the expected decrease in oil revenues for the month of January owing to maintenance work for oil transportation infrastructure,
which would reduce oil. As for the month of last December, the National Oil Corporation announced a record increase in revenues,
reaching 1.115 billion dollars, but Mustafa Sanalla indicated that the government was slow in disbursing the funds that the corporation needed
to continue working after more than eight months of closing the oil ports which lost billions of revenues.

The Petroleum Facilities Guard threatens to halt exports again.

The guards were prevented from loading any oil shipment at the port of Harika and postponing it,
and he also said that the recovery of Libyan oil production still faces great challenges like stopping exports.

Libya was able to increase its oil production from less than 100,000 barrels a day in September of last year when the Libyan National Army raised
the blockade of the oil port to 1.25 million barrels a day at the end of 2020. This caused a drop in prices,
owing to the additional supply, and this affected oil exporters.

This may be one of the reasons for Saudi Arabia’s decision to cut an additional 1 million barrels a day
of its oil production in an attempt to reverse the trend of lower oil prices.