A volatile week for oil.. OPEC’s decisions support prices to rise again

A volatile week for oil: Crude oil witnessed a volatile week from March 29 to April 2,
as the week began on fall of prices, then it managed to rise after disruption of Evergreen in Suez Canal,
but it fell again and rises back during the last days of last week’s trading.

This happened after the last decisions of OPEC.

Although the number of Covid-19 infections has recently increased with the spread of the third wave of epidemic in many countries, especially in Europe, sentiments are now high due to progress in vaccines,
besides some expectations of increasing demand for oil in near future.

Evest is daily following up with you all developments in markets and the impact of events on trading all over the world.

Global crude oil prices were boosted at end of last week,
following expectations that the world economy would recover amid plans to decrease production by major producers.

Based on positive data, the world’s major energy prices rose last Thursday by 2.1% for each Brent crude to record $ 64.86 a barrel, and West Texas Intermediate, which is the US benchmark, by 3.9%, to record $ 61.45.

Oil reduces weekly losses and turns them into gains during just one day

International oil prices began trading week from March 29 to April 2 with a strong downward trend when the threat of the Covid-19 outbreak arose, threatening the ability to restore demand for fuel, including crude oil.

Suez Canal incident also affected about 8.3% of the supply of crude oil and the production of world products.

On a weekly basis, Brent crude oil rose by 0.45%,
while West Texas Intermediate crude rose by 0.79%.

This power reversed last week’s position when they both were weakly compressed,
as they fell by – 4% and – 4.65%, in a row.

In fact, the price of oil was corrected on Tuesday and Wednesday of last week,
after the prevalence of social constraints spread in Europe after the third wave of the Covid-19 virus,
which sparked speculation that the European economy would be affected,
which by its turn will affect oil demand.

On April 2, the price of West Texas Intermediate light crude for May delivery,
recorded $ 61.24 a barrel, while the price of Brent crude oil settled at $ 64.64 a barrel,
rising by $ 1.90 a barrel during the session.

In addition, an increase in US crude oil inventories in the week ending on March 26,
resulted in significant pressure on crude oil products when many concerns about fuel consumption were raised.

OPEC’s decisions support oil

On Thursday, the situation reversed after OPEC + agreed to decline production by another 350, 000 barrels a day in May and 350,000 during June, and by another 400.000 barrels a day during July.

OPEC + consists of member states of the Organisation of Petroleum Exporting Countries (OPEC) and Russia and its allies.

According to Reuters on Thursday

a decline by OPEC + will be just above 6.5 million barrels a day in May.

Up to date, Organisation has reduced production by about 7 million barrels a day.

Saudi Arabia has also made additional voluntary cuts in production by 1 million barrels a day.

During the meeting, Russian Deputy Prime Minister,
Alexander Novak said that global oil demand would grow by 5 to 5.5 million barrels a day this year.

He hoped that global oil inventories would return to their normal levels within 2 to 3 months.

OPEC + reduced its forecast for oil demand growth for this year by 300.000 barrels a day to 5.9 million barrels a day due to wide closure, especially in the blue continent.

Crude oil is one of the goods that have witnessed the largest rise in prices this year.

During the first quarter, the price of oil rose by more than 20%.

This increase was caused by expanded vaccination campaigns against Covid-19.

Professional Committee of OPEC + notes that, although the deployment of vaccinations around the world is rapidly increasing,
the number of infections of Covid-19 is also increasing all over the world.

Measures to reopen and restrict travel continue to be applied in many parts of Europe.

India and Brazil are facing new outbreaks.

Crude oil buyers in Asia have decreased due to weak tourism.
Meanwhile, oil supplies rose, as Iran’s exports to China increased despite US sanctions.

However, when the above-mentioned concerns were gradually removed,
world oil prices sharply turned to be high.

Factors supported oil prices

Oil prices sharply rose when the market received information that OPEC + would increase its production starting from June 2021 but in a rather limited increase.

Investors also expect that demand for crude oil will sharply increase when new refineries in China,
the world’s largest importer of crude oil, come into operation.

According to Bloomberg, China has held 1.4 million barrels of under-construction new refining capacity,
since November 2020.

World oil prices have also risen due to reports of an increase in nations promoting Covid-19 vaccine programs,
while all suppliers have emphasized their productive capacity and effectiveness of current vaccines.

In addition, industrial production activities in Asian countries, including China and India,
are expected to be sharply increased after the Lunar New Year holiday of 2021.

This also leads to a sharp increase in demand, and thus improves market morale.

A volatile week for oil.. OPEC&#8217;s decisions support prices to rise again

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A volatile week for oil.. OPEC’s decisions support prices to rise again