Wednesday, 22 July 2020 10:02

Markets getting balanced on the fear of second wave

Despite the recommendation of OPEC + to reduce oil production by 2 million barrels per day, as well as reducing demand for a new wave of coronavirus, oil markets still maintain a "bullish" (growth in quotes) trend, Brent is traded above $43, and WTI - above $40, GMarkits reports.

The trend is supported primarily by a decrease in imports, further reduction of commercial reserves of crude oil and petroleum products in the United States, which decreased by 7.5 million barrels, down to 531.7 million barrels of oil and 3.1 million barrels of petroleum products respectively.

Oil production in the United States continues to be fixed at the level of 11 million barrels per day, and the number of oil rigs is decreasing.

OPEC raised its demand forecast for 2020 up to 90.72 million barrels per day, which is 0.13 million more than the previous forecast, it is also 0.375 million barrels per day higher than the forecast of CMarkits. In the 3rd and 4th quarters of 2020, analysts expect average demand growth to 92.22 million barrels per day and 96.22 million barrels per day respectively. In addition, non-OPEC countries are expected to supply 61.76 million barrels per day in 2020, which means an increase of 3.26 million barrels per day, which is 0.99 million barrels per day higher than the forecast CMarkits.

OPEC-10 countries as a whole achieved an overall reduction match of 103.64% in June, despite many countries are falling short of their targets, including Angola, Congo, Equatorial Guinea, Gabon, Iraq and Nigeria. It was reported that overall OPEC + compliance was 107% supported by voluntary contributions from Saudi Arabia, the UAE and Kuwait.

Meanwhile, OPEC + JMMC recommended to shift to the 2nd phase of the reduction agreement, which should ease production cuts by 2 million barrels per day starting in August.

Saudi Arabia and Russia will equally increase their production by about 0.5 million barrels, which will go to domestic markets as the two countries reopen their economies. This was confirmed by the Energy Ministers of Saudi Arabia and Russia. According to the forecast, demand figures for Q3 are expected to be 3.69 million barrels per day and 4.40 million barrels per day for Saudi Arabia and Russia, respectively.

However, the Saudi Energy Minister stressed that the group is open to reconsideration of its decision in the event of changes in the market situation, especially with regard to demand shocks similar to those in April.

 

 

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