Fears of weak demand due to the rapid spread of the Corona pandemic dominated the course of the movement of crude oil prices during the past week, which led to the closing of Friday's trading on a decline, while prices maintained the weekly gains, as Brent crude rose 0.9 percent, and West Texas Intermediate increased 1.9 percent.
Next Wednesday, the work of the third monthly ministerial meeting of the OPEC + Production Reduction Monitoring Committee will start via the Internet to assess the market situation and discuss developments in the situation of supply, demand, and stocks, in light of recent developments and changes, especially OPEC +’s decision to ease production cut restrictions starting this month, which is what The volume of cuts came down from the 9.7 million barrels per day that were in place over the past three months to a new level of 7.7 million barrels per day, with additional cuts made by Iraq and Nigeria to compensate for the weak compliance in the past months.
In this context, the international oil information agency, Platts, reported that crude oil futures contracted due to more bleak economic outlooks with slower recovery in demand as the Coronavirus pandemic continued to cause widespread losses.
A recent report by the agency said that despite more bullish US news this week in the form of weak crude oil production and lower storage volumes, the global picture remained more bearish with less than expected expectations for global demand as OPEC + increases its production while more are heading From shale oil producers in the United States to cut back on supplies.
The report indicated that crude oil prices have remained in a narrow range since late June due to the influence of many strong and negative factors affecting crude oil prices, pointing out that oil prices are stuck at the end of the summer situation as the global economic recovery shows signs of slowing down.
He mentioned that China's economic recovery is still uneven and that economic growth expectations in the United States are dwindling with the continued spread of unemployment and the failure of Congress to provide much-needed assistance to support the American economy, noting that the US Congress meeting this week has been postponed until September 8th. Next, without agreeing to a new economic stimulus package as planned.
The report highlights the reduction of the International Energy Agency's estimates of global oil demand in 2020 and 2021, as well as its estimate of demand for OPEC crude due to a slower than expected recovery in the transport and aviation sector, indicating that the International Energy Agency has reduced its estimate of global oil demand for 2020 by 140 One thousand barrels per day compared to its previous expectations to 91.95 million barrels per day, indicating that this would put demand at a level lower by about 8.1 million barrels per day compared to 2019 levels.
He noted that the demand for aviation fuel in North America remained nearly 40 percent below pre-epidemic levels, as American airline American Airlines announced this week that it had canceled flights to more American cities.
The report quoted the International Energy Agency as confirming a decrease in estimates of demand for road transport fuels, especially for gasoline, with the increase in cases of Coronavirus around the world, indicating that the resurgence of the Coronavirus is likely to frustrate travel plans for many individuals until it becomes available. A successful and reliable vaccine.
He pointed out that there is also the case of hundreds of millions of barrels of crude oil and fuel in tanks, which have mainly been transferred to offshore storage facilities, as the volume of raw and refined products stored on sea tankers reached its peak on June 30 at the level of about 380 million barrels. Most of these are discharged by the end of the year.
He pointed to the assertion of prominent analytical circles led by "Rystad Energy" that the gloomy outlook for the recovery of demand will remain in the background clearly at the global level, explaining that in light of the current supply and demand trends, we see prices are unable to record more sustainable gains for a few months with the possibility of returning The supply deficit during the last quarter of the year.
The report confirmed the decline in US crude oil production from its highest level ever at 13 million barrels per day before the epidemic to an average of ten million barrels per day only last May, indicating data issued by the US Energy Information Agency recently confirming that US production recorded an average of 10.7 million barrels per day for the week ending August 7.
He quoted Rystad Energy forecasts suggesting that most of the ground operators in the United States will restore almost all stalled oil volumes by the end of next September while maintaining only a few cuts for the rest of the year, according to an analysis of 25 product data on their profits for the second quarter of 2020. He pointed out that these 25 producers closed nearly 775 thousand barrels per day of oil in April and May, and the size of the closure will increase to 75 thousand barrels per day by the end of this August, but almost all the last barrels will be returned in September.
The report warned that the major losses of US production will come from the natural decline rates of shale wells, as the new drilling operations, which are greatly reduced, will fail to keep pace with the pace of production, especially since the shale oil wells are the fastest in depletion and depletion.
The report pointed out that the number of oil and gas exploration rigs in the United States became relatively stable at 288 for the week ending August 12, but this is still sharply lower than the more than 900 platforms in service a year ago.
On the other hand, with regard to prices at the end of last week, oil prices fell yesterday, on the back of fears that the recovery in demand will be slower than expected due to the closure measures associated with the Covid-19 pandemic, while the increase in supply also casts its shadow on optimism about the decline in stocks crude and fuel.
The International Energy Agency and the Organization of Petroleum Exporting Countries, two of the largest exporters of forecasts, this week reduced their forecasts for oil demand in 2020. OPEC and its allies are raising production this month.
"The widespread question is whether the spread of the Coronavirus will continue to affect the recovery of demand for gasoline and diesel," said Andrew Lipo of "Lipo Oil Associates" in Houston.
Brent crude was settled, down 16 cents, to $ 44.80 a barrel, and US West Texas Intermediate crude lost 23 cents to $ 42.01 a barrel.
On a weekly basis, Brent rose 0.9 percent, and West Texas Intermediate rose 1.9 percent.
US government data supported prices this week, as it showed that stocks of crude oil, gasoline, and distillates decreased last week, while refiners intensified production and improved demand for oil products.
According to data from Baker Hughes Energy Services, the number of oil and gas rigs operating this week in the United States, an indication of the future of supplies, fell to an unprecedented low for the fifteenth week in a row.
OPEC and allies including Russia, in what is known as the "OPEC +" group, have reduced production since May by about 10 percent of global demand before the pandemic to support the market. The deal implies an increase in production this month as demand recovers. It is scheduled to meet a committee of "OPEC +" next Wednesday to study the market.