Osama Suleiman from Vienna
Analysts expect oil price fluctuations to continue this week after last week's transactions ended on Brent crude falling 5.3 percent and US crude 6.4 percent in the first weekly loss after several weeks of price gains.
Analysts believe that the easing of geopolitical concerns in the Middle East has led to a decline in upward pressure on prices, and this coincided with the continued rise in the level of US stocks and market optimism for the trade deal, which will be signed next Wednesday in Washington.
They added that prices will most likely receive relatively support with the announcement of the new trade deal between the United States and China this week, but overall oil and other commodity prices are expected to remain low due to stagnant pressures in 2020.
Analysts pointed out that despite the decline indirect threats of war between the United States and Iran, the industry is still in a state of tension and the geopolitical risks persist strongly, in light of the possibility of disturbances such as shipping accidents or attacks on oil installations, as happened last year.
In this regard, Ross Kennedy, managing director of QHA Energy Services, told "Al-Eqtisadiya" that oil prices rebounded from record levels they had previously recorded after the events in Iraq, which confirms that market factors, which are mostly positive, are pushing towards levels low in prices because of oversupply and weak seasonal demand and the increase in US inventories.
Kennedy pointed out that international reports and data indicate that oil prices are expected to remain generally low in 2020 with the possibility of sudden and temporary rises of up to $ 80 or $ 90 per barrel, but it is likely that the average prices in 2020 will be at the same level in 2019 or less due to the pressures of massive increases in oil supplies from countries outside the OPEC + alliance.
For this part, he explained to "Al-Eqtisadiya", Alexander Bugel, consultant and analyst at GBC Energy, that the developments of the market situation show that price rises were the result of temporary conditions, and that price fluctuations will remain a dominant feature of the market during the coming weeks due to pressures of fears War and supply disruptions, on the one hand, and weak demand and stockpile accumulation.
Bugel added that the market is closer to instability after crude recorded its biggest weekly loss since last July in light of the weak possibility of direct confrontation between the United States and Iran, which dispels fears of disruptions in energy supplies in the Middle East, which reassured large consumers, Who rely mainly on OPEC production and the rest of the Middle East producers.
For this part, Peter Bakher, an economist and energy legal analyst, tells to "Al-Eqtisadiah" that geopolitical risks have a significant impact on the market, especially with the difficulty of predicting their developments, but that the Middle East risks did not have a wide impact on prices, as the rise that took place Its record did not hold out much and was immediately curbed due to the fact that global oil markets remain comfortably supplied, due in large part to the shale oil revolution in the United States.
And another noted that prices fell immediately under the influence of strong pressure resulting from the rise in US stocks by 1.16 million barrels last week, despite previous expectations of a decrease, as gasoline stocks reached their highest level in ten months, which made the producers' alliance in " OPEC + "The idea of reversing the production cuts more deeply, which was started at the beginning of the new year and continuing throughout the first quarter, before re-evaluating its impact in the next March, is not being discussed at all.
In turn, Arfi Nahar, an expert in oil and gas affairs at the African Leadership Company, explains to "Al-Eqtisadiah" that fears still dominate the oil market due to the escalating conflict between the United States and Iran, even if the intensity of the conflict is heading downward, which means More fluctuations in oil prices in the short term, indicating that the decline in fears is caused by OPEC producers retaining huge amounts of surplus energy after reducing production during most of the past three years while benefiting from the American production position that maintained the increasing pace of expansion.
According to "Reuters", prices received support for a short period last Friday, Brent global benchmark crude fell 39 cents to settle the settlement price at $ 64.98 a barrel, and the US West Texas Intermediate crude fell 52 cents to close at $ 59.04.
Phil Flynn, oil analyst at the "Price Futures Group" in Chicago, said that "with the decline in Iran there is a sense that the oil supply is completely safe, but at the present time and with the imposition of sanctions, this report says that the Russian ship had acted aggressively toward an American ship, this causes little fear in the market again. "
Last week, Brent incurred a loss of 5.3 percent, WTI fell 6.4 percent, and the two benchmarks are currently lower than the levels recorded on January 3.
But there is no disruption in Middle East production as a result of growing tensions, and other indicators reported last week of ample supplies.
And American energy companies reduced the number of oil rigs operating for the third week in a row at a time, as producers continue to implement plans to cut spending on new drilling activities for the second year in a row in 2020.
In its closely watched report, Baker Hughes Energy Services said that drilling companies reduced the number of oil rigs by 11 rigs last week, in the largest decline since October, bringing the total number to 659 drilling, the lowest number since March ( March 2017, and the number of operating rigs was 873 in the same week a year ago.
In 2019, the number of oil rigs, an early indicator of future production, fell by 208 as independent exploration and production companies cut spending on new drilling as shareholders sought better returns in a situation where energy prices were falling.
The U.S. Energy Information Administration expects that U.S. crude production will increase to 12.3 million barrels per day in 2019, and to increase to 13.2 million barrels per day in 2020 from the record level of ten million barrels per day in 2018.
Since the beginning of the year, the total number of oil and gas rigs operating in the United States has averaged 789, and most drilling rigs produce oil and gas.
The US Energy Information Administration said that crude oil, gasoline and distillate stocks in the United States rose last week.
Crude inventories increased 1.2 million barrels over the past week to 431.1 million barrels, while analysts expected a decrease of 3.6 million barrels.
Crude stocks at the delivery point in Cushing, Oklahoma, decreased 821,000 barrels last week, according to the Information Administration.
The Energy Information Administration data showed that the consumption of crude oil in refineries decreased by 386 thousand barrels per day, and the refineries operating rate fell 1.5 percentage points last week.
The department said that gasoline stocks rose 9.1 million barrels to 251.6 million barrels, while analysts expected in a poll to rise 2.7 million barrels.
Distillate inventories, which include diesel and heating oil, grew 5.3 million barrels to 139 million barrels, against expectations for an increase of 3.9 million barrels.
Fatih Birol, director of the International Energy Agency, predicted a slowdown in the growth of US shale oil production, noting that global markets are expected to receive good supplies in 2020 and that demand growth may remain weak, which will curb prices.
"We expect demand growth to be just under one million barrels per day," Birol said, adding that growth might remain weak, compared to its historical levels.
He added that there is a supposed surplus of one million barrels per day of oil, which will ensure that the global market receives good supplies.
Birol believes that "production is" OPEC "very strong, we still expect that the production comes not only from the United States, but also from Norway, Canada, Guyana, and other countries, and therefore, I can say that the market in my opinion, with a very good oil, and as a result, we expect prices to remain at $ 65 a barrel.