A new rise in oil prices.. and a decline in global inventories

A new rise in oil prices.. and a decline in global inventories:
Oil prices have risen to their highest level since 2018 as the global economy reopens and global inventories are falling.

The Organization of the Petroleum Exporting Countries (OPEC) held its virtual meeting yesterday, Tuesday, 1st of June, 2021, and decided to increase production at a rate lower than the market demanded, because it assumes the return of Iranian oil to the global market.

Oil prices this week

Oil prices reached their highest level in two and a half years yesterday, as OPEC indicated a slow return to normal production, and demand appears to be rising.

In addition to pressure from corporate boards on major oil companies to adopt more environmentally friendly means.

At the beginning of Tuesday, West Texas Intermediate crude rose by (3.36%) and was trading at $68.61 a barrel, and the benchmark Brent crude was trading at $71 a barrel after exceeding the $70 level earlier in the day.

And Brent crude rose (2.55%) to 71.14 dollars.

At the end of the day, WTI was trading at $68.45 a barrel, an increase (3.2%).

The benchmark Brent crude was trading at $71 a barrel, up (2.4%), its highest level since October 2018.

Petroleum Exporting

The Organization of the Petroleum Exporting Countries (OPEC) and its allies have cut oil
production to keep prices high as the world recovers from the pandemic.

In its meeting on Tuesday, OPEC decided to continue the slow process of restoring production,
which is a positive sign for the market. The group plans to seize 5.8 million barrels per day from
the market or about 6% of the total global production in July.

Oil inventories accumulated in the middle of last year, as countries restricted movement to limit the spread of the “Covid-19” virus, but it now appears that they are gradually reducing until next month, a noticeable shift that indicates a decline in inventories rather than an increase in the market offering.

Iran, a member of the Organization of the Petroleum Exporting Countries, whose exports have been hit by sanctions, could restore more production under an agreement being negotiated with the United States.

OPEC members expect Iran’s production to gradually return if the deal is signed.

OPEC allows a small increase in oil production

As agreed in early April, OPEC raised its oil production in May, but lower production in some countries offset part of the increases in Saudi Arabia and Iraq to lead to a less-than-expected rise in supply from the group, according to a Reuters’ monthly report.

All OPEC members produced 25.52 million barrels per day this month, a daily increase of 280,000 barrels,
according to data from the Organization of the Petroleum Exporting Countries (OPEC) and oil companies.

The study revealed that Saudi Arabia and Iraq’s oil production increased significantly in May,
while the production of Nigeria, Angola, and Iran decreased.

According to the agreement, OPEC’s share of the production rise was 350,000 BPD in May, with 277,000 BPD.

Saudi Arabia is also gradually easing its unilateral cut of 1 million barrels per day over the next few months, starting with monthly production increases of 250,000 barrels per day in May and June.

According to Reuters

According to Reuters’ analysis, the largest jump in oil production among OPEC members was from Saudi Arabia, whose crude oil production rose by 340,000 barrels per day.

While Iraq was the second-largest producer in OPEC after Saudi Arabia, where production increased by 70 thousand barrels per day.

Libya increased its production in May compared to April after eliminating the force majeure conditions for loading oil terminals at Harika Port at the end of April.

Libya was exempted from the OPEC cuts, as were Iran and Venezuela.

Iranian production in the market declined in May amid lower demand from China, which is its main customer.

The OPEC group is expected to confirm its May-July plan to ease oil production cuts by 840,000 barrels per day in July.

Vagueness rates for oil demand in India

The vagueness of oil demand in India affects the outlook for global consumption of crude oil since the second wave of the Coronavirus in the third-largest oil importer in the world three months ago.

Prior to this period, the uneven recovery in India was the main concern about the recovery in global demand for oil in recent months, due to the lack of knowing when the Local lockdown, which was activated to combat the spread of the pandemic and raise the demand for fuel for transportation and economic activities, will end.

Despite the severity of the impact of the second wave of Coronavirus in India,
it did not harm the economy and fuel demand as much as the onset of the pandemic in the country in April 2020.

This year the central government did not impose a nationwide lockdown as it did last year
for fear of a possible outbreak of the virus. Economic collapse during the regional elections.

But the demand for fuel fell in April and May due to the current situation, especially the demand for diesel and gasoline,
and refineries reduced crude oil processing rates in recent weeks as imports decreased.

The global oil market is waiting for the end of the impact of the Coronavirus to reduce demand in India.

Unfortunately, India’s largest oil refineries are not entirely sure when oil demand will recover,
after the number of new daily cases peaked and began to decline.

The data showed that the number of new cases in the capital, Delhi, yesterday was the lowest
since mid-March, while the increase in new daily cases across the country reached its lowest level since April 9.

The new Iran nuclear deal

Last week, the United States agreed to temporarily lift major sanctions in the oil, gas, petrochemical,
and automobile sectors, and some existing sanctions in the Iranian banking sector.

But Iran’s Supreme Leader, Ali Khamenei, and senior figures in the Iranian Guard are still calling
for additional removal of individuals and companies from the US sanctions list.

Although Khamenei has often stated that Iran will not – and is not legally required to –
renegotiate any elements of the Joint Comprehensive Plan of Action (“nuclear deal”)
from which the United States unilaterally withdrew in May 2018.

The Iranian sources believe that they may concede to this intransigent position.

A new rise in oil prices.. and a decline in global inventories

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