Oil rising sharply after recent OPEC decisions and US

Oil Rising Sharply

Oil rising sharply after recent OPEC decisions and US low inventories

The American Petroleum Institute (API) announced Tuesday
the decline of 1.663 million barrels of crude oil in US crude oil inventories for the week ending January 1.

While inventories witnessed a decrease of 4.785 million barrels of crude oil inventories for the previous week ending on December 25 as well,
while the US Energy Information Administration (EIA) recorded a decrease of 6.1 million barrels.

Factors that affected oil prices

US crude oil prices rose on Tuesday after news of Saudi Arabia volunteering cuts in its oil production,
and international political tension over Iran’s seizure of a South Korean ship intensified.

Brent crude Oil futures rose $ 2.51 (or 4.9%) to $ 53.60 a barrel.

US West Texas Intermediate (WTI) crude for February delivery closed up $ 2.31, or 4.9 percent,
to settle at $ 49.93 a barrel on the New York Mercantile Exchange.

Saudi initiative in favor of oil stability

Saudi Arabia implemented additional voluntary cuts in oil production by 1 million barrels per day in February and March.

These cuts come within the framework of an agreement to persuade producers from the group consisting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies to keep production stable, amid fears that the new closure of the Coronavirus will harm the demand for oil.

OPEC resumed talks on Tuesday after reaching a dead-end over oil production levels in February this week.

Results of the last OPEC meeting

After talks were halted on Monday, the OPEC meeting was extended to Tuesday 5 January 2021,
and the group agreed to raise oil production by 75,000 barrels per day from January levels,
according to the OPEC press release after the meeting.

Saudi Arabia’s late announcement

Saudi Arabia’s late announcement after the meeting led to a spike in oil prices –
as Saudi Arabia voluntarily cut an additional 1 million barrels per day in February and March above its current quota –
all at a time as OPEC allies increase production.

Not only did OPEC agree to production levels for February,
but also to production levels for March. The March production level will see an additional 120,000 bpd increase from February levels,
or 195,000 b / d from January levels.

Production quotas for March have already been set,
and production quotas for April will be decided at the February meeting.

In the previous meeting in December, total production cuts were changed to 7.2 million barrels per day
for the month of January instead of 7.7 million barrels per day.

But in addition to Saudi Arabia’s voluntary cuts, total production cuts in February will reach 8.125 million barrels per day,
and the total cuts in March will reach 8.05 million barrels per day.

Regarding Saudi Arabia, there are no changes to the official production quota for February or March.

There are no changes to the shares of the Emirates or Iraq.

For OPEC, there are no changes for February to individual quotas.

Consequently, all production increases are going to non-OPEC countries, such as Kazakhstan and Russia.

Indeed, Russia will increase its production from 9.119 million barrels per day in January,
to 9.184 million barrels per day in February, and 9,249 in March.

And the allies are the only ones who will get an increase in production quotas during the next two months,
and therefore OPEC bears more burdens in the process of reducing production,
which means that Russia will have a role in the coming days, especially since OPEC is not the only influence on the market.

Regardless of the reasons for the decision and how it happened,
the oil market witnessed a good recovery, as prices rose in the afternoon,
and US West Texas Intermediate crude rose by more than 5%, and Brent by nearly 5%.

Expectations of a recovery in the oil market in 2021

After the oil industry collapsed in 2020, there were signs of stability,
and the slow recovery in crude oil prices and for the oil companies began.

Oil prices are currently cautiously in the $ 50 range as a new wave of lockdowns has brought the Western world to a standstill again.

However, oil demand in Asia is returning to pre-epidemic levels and the market is starting to stabilize.

Shares of major companies like Exxon and Shell have risen since the beginning of the trading year.

Reconnaissance Energy Africa began to outperform, as it is a small company that has secured oil and gas rights to an entire sedimentary basin in Namibia and Botswana – both very friendly to oil exploration, with very low ownership fees (5%) and the potential to discover an estimated 120 billion barrels of oil. 

Continuing concerns about the impact of the Coronavirus on oil

According to an internal document issued by OPEC on Monday,
in which it sheds light on the downside risks and stressed that “the re-application of measures to contain the Coronavirus across continents,
including complete closure, limits the recovery of oil demand in 2021.”

After the spread of the Coronavirus with such ferocity, it led to a decline in global demand for oil,
and the Kingdom of Saudi Arabia entered into a dispute with Russia over production quotas,
as the latter is looking to raise the level of production while the former considers that the time is not ripe to raise it,
which led to disputes that affected prices.

And it made oil fall into the 1930s.

Now, despite these recent decisions that supported oil, there is still pressure on the commodity,
which has been suffering since 2020, as the epidemic with its new strain strikes large places around the world,
infections increase on a daily basis, and more stringent restrictions are imposed to confront the virus.

Oil High and Mixed sentiment in stocks and gold markets

Oil High and Mixed sentiment in stocks and gold markets

Oil High and Mixed sentiment: The market is witnessing a state of anticipation for the results of Senate elections in Georgia,
as Democrats seemed to be very close to resolving the results amid high sentiment that dominates markets,
matched by a state of anxiety and uncertainty due to the epidemic situation.

 

Evest tracks market movements closely to help you make the right investment decision at the right time.

 

A sharp rise in oil prices after OPEC decision

Oil prices rose today supported by OPEC decisions taken yesterday,
as the Organization of Petroleum Exporting Countries maintained current production levels.

 

Brent crude rose 0.54%, recording $ 53.40 a barrel,
while US West Texas Intermediate crude rose 0.20% to trade at $ 50.03 a barrel.

 

The organization announced that Moscow intends to increase its oil production in
February and March at the expense of Saudi Arabia.

This decision was reached by OPEC + countries through mutual consent.

 

Russia and Kazakhstan will increase production by a total of 75.000 barrel a day,
by 65.000 and 10.000 barrels a day respectively.

 

Saudi Arabia is voluntarily reducing its production by one million barrels a day
during February and March, which leads to reducing net production by more than 900.000 barrels a day.

 

Oil prices rose after OPEC + countries agreed to reduce oil production in
February and March, which will reach 7.125 million barrels a day now.

 

The organization had agreed to reduce production because of Coronavirus as of March 9, 2020
witnessed the largest sharp drop in prices since 1991 with the start of the Gulf War.

 

After that, there were many price collapses in the oil market –
against the backdrop of the situation of Coronavirus and restrictions due to epidemic in the world’s largest economies,
leaving the market mired in a sharp drop in demand and excessive oil surplus.

 

On April 12, 2020, OPEC + member states including Russia agreed to reduce oil production.

 

OPEC+ production reducing agreement provides for a production limit of 7.7 million barrels a day till the end of 2020.

 

Last year, on December 3 OPEC + countries including Russia,
agreed to maintain the cuts imposed on oil production, which have been in place since April 2020,
but with some easing of these cuts through increasing production by 500.000 barrels a day,
provided that this agreement will be monthly reviewed.

 

Gold falls after Republicans reduced the lead with Democrats in Georgia

Gold is still watching the developments of the run-off in Senate elections in Georgia,
as the yellow metal fell as Democrats’ progress was reduced in two seats which might give Joe Biden the largest legislative tool in USA.

 

Gold has lost about $ 5 since the start of today’s trading, as it is now trading around $ 1945 an ounce.

 

Democrats and Republicans are competing for a final two seats in Senate,
where Democrats’ victory means the party’s control of the legislative branch after they have already controlled the executive one.

 

Democrats’ victory will lead to more economic stimulus which will by its turn weaken dollar and support gold’s upward trend.

This i s an early talk, as results are still not announced yet.

 

In general, expectations are increasing that gold will trade positively through the coming period,
supported by weak dollar and a wider spread of Coronavirus in addition to increasing financial stimulus.

 

Democrats’ victory would give market immediate higher sentiments in a short time,
which would push gold to higher levels and make a price recovery, even if it is short.

 

Divergence in Asian stock markets.. US market closed higher

After tracking the performance of exchanges by Evest,
East Asian and Australian stock exchanges did not show a clear direction for trading
as some high sentiment dominate regarding the victory of Democrats in Georgia.

This was matched by declining sentiment due to the accelerating number of Corona virus
Covid-19 infections besides, new restrictions imposed as a result.

 

Kospi Index in Seoul rose by more than 3000 points for the first time but it declined and closed down 0.75%, recording 2.968.21 points.

 

As for Shanghai Composite Index, it witnessed a positive change of about 0.51% to 3546.74 points,
while Hang Seng Index decreased by less than 0.01% and recorded 27.649.08 points,
as business activity slowed among Chinese service providers in December.

PMI also declined to 56.3 points after it reached 57.8 points in November.

 

Nikkei continues its negative trend declining by 0.38%,
recording 27055.94 points as Japan will make its decision tomorrow regarding a state of emergency in Tokyo and 3 neighboring cities.

 

In Sydney S &P / ASX-200 index fell 1.1%, to 6.607.10 points as traders took profits
after the index made its best start since 2001.

 

In USA, optimistic state of Democrats’ victory pushed the three main indices higher
as Standard & Poor’s 500, Dow Jones and Nasdaq, each recorded an increase of 0.71%, 0.55% and 0.95%, respectively.

 

European stock exchanges are witnessing divergence due to mixed and optimistic
sentiment by Democrats for the state of Georgia but pessimism due to the increased frequency of HIV infections.

 

US Dollar declines against a basket of major currencies 

US dollar retreated after a short recovery as Democrats were close to sealing results
in the state after Republicans initially narrowed the difference.

 

Euro rose by 0.32% against US dollar, recording $ 1.2334, while Sterling rose by 0.25%, recording $ 1.3650,
but Australian dollar rose by 0.53%, reaching $ 0.7795 and New Zeeland dollar rose by 0.39% to record 0.7281.

 

US Dollar fell slightly against Japanese yen recording 102.70 and against Chinese Yuan by 0.05%, registering 6.4565 Yuan.

Oil prices in a new jump

Oil prices in a new jump after the drop in US crude oil inventories

Oil prices in a new jump: The American Petroleum Institute (API) announced on Tuesday, December 29, 2020,
a decrease of 4.785 million barrels of crude oil in US crude oil inventories for the week ending December 25.

This happened after an increase of 2.700 million barrels in crude oil inventories for the previous week ending December 18th,
while the US Energy Information Administration announced a decrease of 0.6 million barrels in the same period.

Gasoline Inventories fell by 131,000 barrels, and distillate fell by 1.88 million barrels,
easing concerns about the outlook for energy demand amid a new strain of
The coronavirus is likely to further restrict international travel.

On the other hand, analysts also expected the official government report on
Wednesday to show that weekly US crude supplies fell by 2.6 million barrels.

In the previous week, the American Petroleum Institute announced an increase in oil inventories by 2.70 million barrels,
after analysts had expected to withdraw 3.135 million barrels.

The changes in the oil price

Oil prices rose ahead of the release of data on Tuesday,
optimistic about the stimulus for the United States to increase aid payments to tackle the epidemic signed by
President Donald Trump and the Congress on Monday,
as the move is supposed to help increase the demand and encourage investors to take more risks
in the time that holds hope of strengthening Economic growth.

However, the gains are still limited as a result of OPEC’s plan to gradually increase oil production at the
beginning of the New Year despite closures and reduced demand.

Ahead of the American Petroleum Institute data released on Tuesday,
the price of WTI rose $ 0.41 (+ 0.86%) to $ 48.03, up $ 0.8 a barrel over the week.

Brent crude oil index also rose by $0.44 at the time (+ 0.87%) to $ 51.30 – up nearly $ 1 a barrel over the week.

At 4:36 PM on Tuesday, the WTI was trading at $ 47.99, while Brent crude was trading at $ 51.07.

US West Texas Intermediate (WTI) crude futures for February closed 38 cents,
or 0.8%, higher at $ 48.00 a barrel on the New York Mercantile Exchange.

Brent crude futures for February settled 23 cents, or 0.5%, up at $ 51.09 a barrel on the London Futures Exchange.

Weekly energy production rates

According to the Energy Information Administration – US oil production was flat at 11.0 million barrels per day for the week ending December 18 – that’s 2.1 million barrels per day lower than an all-time high of 13.1 million barrels per day in March.

 

The American Petroleum Institute also announced that gasoline inventories decreased
by 718,000 barrels of gasoline for the week ending December 25 – compared to the previous week’s decline of 224,000 barrels.

Analysts had expected an increase of 1.778 million barrels this week.

Distillate inventories decreased by 1.877 million barrels for the week,
compared to last week’s increase of 1.03 million barrels, and Cushing inventories increased this week by 131,000 barrels.

The impact of recent decisions on the oil market

Oil prices jumped on Tuesday after the Democratic-led US House of Representatives voted on Monday
to fulfil President Donald Trump’s request to pay Americans $ 2,000 for coronavirus relief operations,
which contributed to an increase in oil demand.

But concerns about coronavirus lockdowns continued to curb gains in the short term.

And by the decisions of the previous meeting of OPEC +
(the Organization of the Petroleum Exporting Countries and Russia),
which would have reduced record oil production cuts this year to support the market.

The group is set to increase production by 500,000 barrels per day in January,
and Russia supports another increase by the same amount in February, with this increase continuing until April.

The decision was seen as a compromise between the more aggressive backers of deeper cuts such as Saudi Arabia
and those eager to resume production growth such as Iraq and Russia.

The news of the OPEC + decision was welcomed by traders who were already optimistic
about a recovery in demand thanks to the positive vaccine news.

Oil prices recovered some of their losses since the start of the epidemic on the back of this
positive news and remained high even after OPEC lowered its demand forecast for 2021.

According to Russian Federal Customs data, citing domestic shipping analysis outlet SeaNews,
Russian crude oil exports fell 10.4% in volume year-on-year in the January-October period,
due to lower demand and the OPEC + deal.


Russia’s exports of crude oil

The value of Russia’s exports of crude oil decreased by more than 40% in the same period due to lower oil prices
compared to its average price in the first ten months of 2019.

The value of Russian crude oil exports decreased by 40.6% between January and October 2020,
and its value reached 60.326 billion US dollars, according to data from the Russian Federal Customs Service.

In October 2020 alone, the amount of Russian crude oil exports decreased by 25.3%
compared to October 2019, and decreased by 0.9% compared to September 2020.

The value of Russian crude exports decreased by 51.9% annually in October, as the value of exports was 5.13 billion US dollars.

The new strain of COVID-19 and developments in oil prices

The new strain of Coronavirus has caused movement restrictions to be re-imposed within the United Kingdom,
which led to a decline in demand in the near term and negatively affected prices,
while hospital admissions and infections increased in parts of Europe and Africa.

However, there is positive news that oil prices may gain strength with the increase in vaccination programs around the world next year.

Optimism about vaccines has the potential to overcome fears about the Coronavirus.

The US Commodity Futures Trading Commission said Monday that traders raised their
net US crude futures and options in the week ending December 21.

 

Oil prices in a new jump