Osama Suleiman from Vienna
The resurgence of Coronavirus infections worldwide, especially in the United States and China, and the high level of oil stocks, caused pressure on crude prices and recorded a weekly loss, as Brent crude fell by about 1 percent and American crude 1.6 percent amid widespread fears of weak global demand for Crude oil and increased concern of recession and global economic downturn.
And OPEC + producers continue their intensive efforts to raise the level of compliance to reduce production for all producers, as they conduct a review of compliance with the agreement to adjust production levels during the ministerial meeting of the Committee to monitor production cuts in mid-July after extending record production cuts by about 9.7 million barrels per day for an additional month.
In this context, the Organization of Petroleum Exporting Countries "OPEC" confirmed that the declaration of cooperation between the producers "OPEC +" reached last April the largest and longest voluntary adjustment in production at a level of reduction of up to 9.7 million barrels per day for two months and then was extended an additional month, pointing out to The commitment of producers to the plan to reduce production over a period of two years guarantees the stability of the market in the long term, in the context of the conviction of the producers of the need for a proactive and coordinated action to achieve stability in the market.
A recent report by the international organization quoted Mohamed Barkindo, the Secretary-General, as confirming that "OPEC" and its allies outside the organization responded quickly and decisively to the unprecedented contraction in the oil market, noting that despite the unparalleled production adjustments agreed during the ministerial meeting in April the past, however, the near future is not clear due to the widespread uncertainty in the market due to wider closings in many economic sectors around the world.
The report warned of the dangers of declining demand in the global market and the rapidly increasing levels of oil stocks, noting that "OPEC" plays a wide positive role that is widely appreciated by the international economic community, which commends the organization's efforts in achieving stability in the market and communicating effectively with other producers. Outside the organization's members.
He stressed that the cooperation charter between the "OPEC" producers and outside it provides an important framework for international dialogue and cooperation on a large scale, in order to prevent the recurrence of severe crises in the market, as happened last April, where American crude slipped to the negative region and fell to the lowest level, which is negative $ 37.63 a barrel.
The report, quoting experts and analysts, expected that the measures to adapt and intensify the means of recovery and growth in the market may depend on April 2022, indicating that no one knows when the decline in demand will stop? Nor is the speed or at what level will return, pointing out that the decisions of involuntary closures - especially in American production - help the success of plans to restrict oil supply, noting that it is not necessarily direct participation in production cuts implemented by the "OPEC +".
After that, the high levels of oil stocks affect the developments and expectations of the market in the near term, indicating that the consensus of producers in last April on the commitment to reduce production has had a very positive return on the market due to the size of record production adjustments and the long time span, which lasts about two years.
The report of the organization believes that the production cuts by the "OPEC +" alliance contributed in parallel with the easing of the closure restrictions in the recovery of the markets and achieving gradual relative stability, especially with the presence of additional cuts outside the April decisions, and it had a good immediate impact, explaining that some of the supply cuts from countries Non-OPEC members were inevitable in the face of falling market forces.
He pointed out that the market needs patience in order for demand to begin to rise, indicating that a tangible improvement is likely to occur in the second half, as it is expected that the year 2021 is a year of good price recovery thanks to the productive adjustments affecting the global oil market that extend from the second half From 2020 to 2021.
He stated that the independent American oil companies will face the persistent closing down pressures, which prompted them since the outbreak of the pandemic to reduce their capital expenditures significantly for the year 2020, pointing to the large decline rates in new investments in oil resources, explaining that most of the suppliers, who resorted to closing production, were due to a drain Storage space and marketing difficulties in light of supply glut and weak prices.
He noted the analysts warning against relying only on the efforts of "OPEC" and its allies from non-member countries of the Economic Cooperation Organization in achieving stability in the market, noting that there should be greater support and greater cooperation between the various traditional and new producers, and therefore "OPEC +" focuses on communication With other countries not participating in the Declaration of Cooperation as a matter of great importance in the coming period.
He stresses the importance of enhancing cooperation and dialogue at all levels, whether governments, international organizations, and alliances such as G7, G20, and the International Energy Agency and to continue to support lines of communication, keep them open, and supportive partnership between stakeholders.
The report conveyed the conviction of many international experts that the extreme fluctuations witnessed by the markets during the current crisis do not benefit anyone, as producers, consumers, and investors are all in the same boat, and they need to overcome the difficulties of the current market environment, stressing the need for sustainable cooperation between all producing countries Oil, international oil companies and independent producers to form a broader front to restore balance in the market.
He pointed out that there is a lot of recognition of the contributions made by the energy ministers of the Group of Twenty and the support provided by the highest levels of government and international oil companies to enhance efforts to achieve stability in the energy market, expected that the current crisis resulting from the rapid spread of Corona will achieve the greatest level of efficiency in the industry American oil in particular, as American companies are racing to survive the consequences of this unprecedented historical crisis, which destroyed production as well as global demand.
He stressed the need for a strong strategy at the international level that helps to reassure markets and investors, pointing out that "OPEC", along with the countries participating in the declaration of "OPEC +", will continue to be the driving force behind the efforts to stabilize the global market, pointing out that there is general agreement The need to strengthen international dialogue on the oil market to achieve stability, as this can be achieved through voluntary initiatives with contributions from international and multilateral organizations.
The report pointed to expectations of some international analysts that the current crisis could relatively accelerate the occurrence of peak demand for oil due to the decrease in air travel, in addition to the shift to more domestic industrial production on a larger scale and increased reliance on virtual meetings and support efforts to reduce urban pollution, congestion and noise And the potential use of stimulus funds to accelerate the transfer of energy away from fossil fuels.
He added that there is a completely different scenario, which the analysts put forward, that the demand for crude oil and fuel will rise, as a result of people switching from public transportation to transporting by private cars in order to benefit from low energy prices, which will lead to the activity of road travel, and thus lead to Achieving a strong economic recovery is also driven by government stimulus plans.
On the other hand, with regard to prices at the end of last week, oil prices were settled down against a backdrop of a jump in the number of new cases of Coronavirus in the United States and China and growing concerns about increasing US production, while crude inventories are still at record highs.
Brent crude futures at settlement fell to $ 41.02 a barrel, down 1 percent, on a weekly basis. US West Texas Intermediate crude futures fell to $ 38.49 a barrel, incurring a weekly loss of 1.6 percent.
In dealings in the United States, early gains, which were supported by some optimism about growing traffic, which boosts fuel demand, faded due to fears that increased Covid-19 injuries in US states, its consumption of gasoline is significant, may undermine the recovery of demand. Cases have increased sharply in California, Texas, and Florida, the three most populous US states.
On Friday morning, Texas Governor Greg Abbott changed his plans to resume activities in the state, ordering the closure of most cafes and restaurants, due to the increase in cases.
This may hinder the steady increase in refining production, as American refineries are currently operating at about 75 percent of their capacity, according to official data.
"Employers are delaying the return of their employees to offices again, and this will affect the return of demand for gasoline," said Andrew Libo, president of Libo Oil Associates.
A survey of executives in the United States' largest oil and gas production area, conducted by the Dallas Federal Reserve, concluded that more than half of the officials, who cut production, expected some production to resume by the end of July.
According to data from Baker Hughes, the US and Canadian energy companies have reduced the number of oil and natural gas rigs operating to a new record low this week.