A massive decline in oil inventories and continued increase in prices

A massive decline in oil inventories and continued increase in prices: Yesterday, Tuesday, June 15, 2021,
the American Petroleum Institute announced that crude oil inventories decreased by 8.537 million barrels for the week ending on June 11.

Analysts had expected a much smaller decline of 3.290 million barrels during the week.

As for the previous week, the institute recorded a decline in oil stocks, which amounted to 2.108 million barrels,
after analysts had expected a decline of 2.036 million barrels.

Crude oil stocks have fallen by more than 22 million barrels since the beginning of 2021,
but are still rising by 34 million barrels since January 2020.

The API reported an increase in gasoline inventories

The API reported an increase in gasoline inventories of 2.852 million barrels for the week ending June 11
in addition to a 2.405 million barrel increase in the previous week.

Analysts had expected a decline of 614,000 barrels this week.

Distillate inventories witnessed an increase in inventories this week,
which amounted to 1.956 million barrels during the week,
in addition to the increase of 3.752 million barrels last week. 

Cushing inventories fell this week by 1.526 million barrels.

Weekly oil prices

West Texas Intermediate (WTI) and Brent crude prices rose again during Tuesday
as the market digested new demand expectations that the oil market
may return to its brilliance in the second half of this year,
despite previous expectations that oil demand may take years to recover to reach levels before the pandemic.

In the middle of the day and before the data was released,
the price of West Texas Intermediate crude rose $1.34 (+1.89%)
and was trading at $72.22, an increase of $2 per barrel in the week.

The price of Brent crude rose $1.24 a barrel (+1.70%) and was trading at $74.10 a barrel.

After the data was released, WTI was trading for $72.27 while Brent crude was trading for $74.14 a barrel.

Oil production rates this week

With crude inventories down again this week, US oil production increased to an average of 11.0 million barrels per day for the week ending June 4,
according to data from the Energy Information Administration.

This represents an increase of 200,000 barrels per day compared to the previous week.

Saudi Arabia raises its daily oil production to 10 million barrels

Saudi Arabia is expected to raise its crude oil production to 10 million barrels per day by the end of 2021,
a daily increase of 1.5 million barrels this month from May, in response to the high global demand for oil.

Last May, Saudi Arabia pumped approximately 8.5 million barrels per day, after increasing its production by 345,000 barrels per day,
starting in April, to gradually ease the cuts according to the OPEC agreement,
according to what OPEC showed last week in its monthly report.

The International Monetary Fund expects the Saudi economy to grow by 2.9% in 2021.

The International Monetary Fund also stated in its latest regional outlook for the Middle East and North Africa in April that higher oil prices,
a recovery in the global economy, and oil demand are expected to lower the fiscal breakeven oil price for the major oil producers in the Middle East,
with the fiscal breakeven oil price for Saudi Arabia dropping to $65.70 in 2022 from $77.90 in 2020.

Meanwhile, official data issued by the Kingdom of Saudi Arabia, today, Monday,
showed that the non-oil sector in the Kingdom of Saudi Arabia grew by 2.9 % in the first quarter of 2021.

However, the gross domestic product decreased by 3.0 % over the year due to the oil sector contracted by 11.7 % in the first quarter of 2021.

Economists’ forecasts for Saudi production

Bloomberg Agency published the expectations of Farouk Sousse (the economist in the Middle East and North Africa),
that Saudi oil production will rise by 500,000 barrels per day from previous estimates.

Goldman Sachs Bank believes that Brent crude will reach $80 a barrel this summer with the rapid recovery of global oil demand.

Production in Saudi Arabia is expected to rise to 9.5 million barrels per day by the end of July.

Oil production is set to reach 10 million barrels per day by the end of this year and 10.5 million barrels per day next year,
according to Goldman Sachs.

The recovery in global demand and the strong domestic recovery in oil demand also prompted Goldman
to raise its economic growth forecast for Saudi Arabia.

The American investment bank is now seeing the Saudi economy rise by 4.5 % in 2021,
compared to previous forecasts of 2.5 % growth.

A fall in Libya oil production 

Libya’s crude oil production has fallen by more than 200,000 barrels per day, or 20%, in recent days,
due to pipeline maintenance at Sharara, the largest oil field.

Libya has reduced this week’s oil production at fields operated by Waha Oil Company,
due to leaks on the pipeline connecting the oilfields to the oil export terminal, Mustafa Sanalla,
chairman of the National Oil Corporation (NOC), said during an online conference, as quoted by Bloomberg.

He also said that maintenance has reduced production in the Sharara field, the largest producing field in Libya, during the past two weeks.

It is estimated that Libya’s oil production has decreased by more than 200,000 barrels per day
from last May’s production of 1.1 million barrels per day.

last week

In the middle of last week, sources said that Libya could lose 60,000 barrels per day of oil production
after the leak of the pipeline transporting crude oil from the Al-Sammah oil field to the Sidr port.

One of the engineers of the Waha Oil Company told Reuters that it is possible to stop pumping operations in the field.

Another said that a previous leak in the pipeline was controlled the day before, but it leaked again the next day.

In recent years, Libya has not been interested in maintaining the infrastructure of the oil sector,
so it has been damaged by pipeline leaks more than once.

Now the National Oil Corp (NOC) is facing enormous challenges in rehabilitating and restoring oil facilities,
due to the lack of funds and the still volatile security situation in Libya.

A massive decline in oil inventories