Osama Suleiman from Vienna
A positive atmosphere prevailed in the crude oil market at the end of the week’s dealings due to the success of the meeting of the Ministerial Committee to monitor the agreement to reduce production in the "OPEC +" alliance, which revealed a rise in compliance to 102 percent with pledges to continue improving the level of compliance with compensation by producers who were less committed in last month.
Prices also received support from the drop in US production due to Hurricane Sally, which disrupted many supplies of oil and gas. Brent crude gained 8.3 percent on a weekly basis, while US crude gained 10 percent, in a new and good consolidation of price gains.
In this context, the "World Oil" report affirmed that Saudi Arabia showed at the last meeting its determination to maintain compliance rates for the agreed production cuts, and gave assurances of achieving transparency and preventing any damage to the reputation and credibility of "OPEC +".
The report pointed out to the continuation of coordination and understanding between Saudi Arabia and the UAE, as Suhail Al Mazrouei, the UAE Minister of Energy, was keen to join the meeting from Riyadh and not from Abu Dhabi, to confirm the depth of Saudi-Emirati relations, especially with regard to joint coordination to restore balance in the oil market.
He pointed to the UAE’s pledge to correct any previous weakness in compliance, especially after the International Energy Agency pointed out that the UAE had made only 10 percent of the cuts that it pledged last August.
The report noted Prince Abdulaziz bin Salman, the Saudi Minister of Energy, affirming the commitment of OPEC + producers to achieving transparency and the utmost commitment to preventing any damage to OPEC’s reputation and credibility, referring to the UAE’s credibility and transparency position.
He stated that the UAE's excess production amounted to about 520,000 barrels per day in August - according to the International Energy Agency - pointing to the UAE’s commitment to correcting performance in the coming period, especially in light of this difficult time for the oil market, and amid indications that the second wave of the Coronavirus is hurting by request again.
The report expressed concern about developments in the market situation, as, after months of stability, Brent crude fell below $ 40 a barrel at the beginning of last week for the first time since last June, pointing to Russian Energy Minister Alexander Novak saying that everyone understands how difficult the recovery is. To pre-crisis levels, where prospects for the recovery of global GDP and oil demand are being revised. These are the trends that we need to always discuss and take into account in our future actions
He pointed out that all OPEC + members who exceeded their production targets pledged to make adjustments with additional cuts in subsequent months, explaining that most of the cuts and compensation come from Nigeria and Iraq and will be completed by the end of this month, as a deadline was given until the end of November to complete Compensation process.
The report highlighted the Saudi Energy Minister’s saying that we must strive to expedite the completion and implementation of the compensation plan before the end of the year.
For its part, the Oil Price report indicated that this month is one of the difficult months for the oil market in light of the accumulation of bearish news that led to the collapse of oil prices at the beginning of the month, pointing out that prices recovered relatively this week due to three main factors, including the interruptions in American production due to Hurricane Sally, in addition to the decline in oil storage activity, as well as high compliance by the "OPEC +" group, which led the recovery in the price level.
The report stated that oil prices rose after the "OPEC +" meeting, as oil gained more confidence after the Saudi Energy Minister warned speculators against betting in the market. He also warned against continuing bets on lower prices, stressing that OPEC + will actively and proactively manage the market. The group pressured laggards to increase their compliance.
He pointed out to Goldman Sachs’s expectations that oil prices will be recorded at $ 49 a barrel by the end of this year and his assessment that the oil market is still in deficit, with speculation currently at very low levels, indicating that China's crude oil imports tended to decline significantly in September ( This month, compared to the past four months, the rest of Asia has slowed imports dramatically this month as demand continues.
The report pointed out that the crude oil discharged in Chinese ports in the past two weeks recorded less than eight million barrels per day compared to levels similar to what China imported in March and April, and that China's oil imports so far this September It indicates that the world's largest importer of crude oil is importing far less than any month ago.
He mentioned that earlier this year, China imported record quantities of crude oil in May and June, as the oil-hungry country tried to take advantage of low oil prices in April and supported imports of crude oil that broke record prices. Oil during the late spring and summer and the recovery in oil demand in the rest of the world has just begun and then fluctuates amid fears of a second wave of the Corona epidemic.
On the other hand, with regard to prices at the end of last week, there was little change in oil prices on Friday, as they were under pressure after a Libyan leader said that a one-month blockade would be lifted on the country's oil exports, while crude futures contracts were supported by positive indicators from a meeting OPEC +.
Crude and Brent recorded a weekly gain after Saudi Arabia pressured its allies to adhere to production quotas and reduce Hurricane Sally to production, and banks, including Goldman Sachs, expected a supply deficit.
Brent fell 15 cents at settlement on Friday to $ 43.15 a barrel, but achieved an increase of 8.3 percent on a weekly basis, while US crude futures rose 14 cents to settle at $ 41.11 a barrel, with a weekly gain of 10 percent.
Oil futures followed the impact of US stock indices, which fell dramatically, and last Thursday, a major commitment from the Organization of Petroleum Exporting Countries and its allies pressed for better commitment to oil production cuts in the face of declining crude prices.
Prince Abdulaziz bin Salman, Saudi Minister of Energy, said at the committee meeting that the "OPEC +" producer group could hold an extraordinary meeting in October if the oil market deteriorated due to weak demand and increased cases of Coronavirus.
The two benchmarks fell at the beginning of the session but rose strongly this week after Hurricane Sally cut US oil production, and OPEC and its allies offered steps to counter the market weakness.
Goldman Sachs expected the market deficit to reach 3 million barrels per day in the fourth quarter of the year and confirmed that its target for Brent would be $ 49 by the end of the year and $ 65 by the third quarter of 2021.
The Swiss bank "UBS" also pointed to the possibility of a supply deficit, expecting the Brent price to rise to $ 45 a barrel in the fourth quarter of the year and to $ 55 in mid-2021.
And in the Gulf of Mexico, US producers began restarting rigs after a five-day hiatus caused by Hurricane Sally. A tropical depression in the western part of the Gulf of Mexico may become a hurricane in the next few days, threatening more US oil facilities.
Baker Hughes Energy Services said that the number of US oil rigs in operation, an early indication of the future of production, fell by one rig this week to 179, its lowest level since mid-August.