Oil continues declining amid great pressures
Oil continues declining amid great pressures
Oil continues declining amid great pressures:
Last Friday, at the end of the week’s trading, global oil prices retreated amid an increase in US crude oil inventories and market concerns about signs of a return of Coronavirus “Covid-19” to China, especially as epidemic restrictions in China will reduce fuel demand in the World’s largest oil importer.
Brent crude futures for March delivery fell 69 cents, or 1.23%, to settle at a rate of $ 55.41 a barrel.
By Evest analysis of data and oil prices during a week, it turns out that US West Texas Intermediate crude fell by 0.3%, while Brent crude rose by 0.6%.
Stocks are rising… Number of US rigs increases for the ninth week
Oil reserves in the United States significantly rose after 5 weeks of decline, contrary to the expectations of analysts.
According to weekly reports of the US Energy Information Agency (EIA),
US crude oil inventories actually increased by 4.4 million barrels during last week ending on January 15 compared to the previous week as expectations indicated a decrease of 1.2 million barrels.
Oil prices decreased when this report was released in a market that is anxiously watching signs of a return of Coronavirus in China.
This week, US energy companies added oil and natural gas rigs for the ninth week in a row.
This was done amid rising prices over the last few months.
However, the total supply of US crude oil is still 52% lower than the same period of last year.
Recovery in fuel demand in China contributed to rising crude oil prices at the end of last year.
The United States and Europe are lagging behind with the upward trend in demand vanishing
as a new wave of Covid-19 cases led to a lockdown in a number of countries.
US Department of Transportation previously stated that travel traffic in the United States of America
decreased by 11% in November, last year.
The decline was steeper than October’s data when Coronavirus cases increased.
Analysis of weekly reports of oil inventories
Despite the increase in US oil inventories, gasoline reserves decreased by 300,000 barrels,
while analysts expected a decrease of 2.5 million barrels and fell below the average of the last five years (-3%).
Distillate reserves rose less than expected by 500.000 barrels compared to 1.8 million barrels according to analysts’ expectations.
Exports decreased by 750.000 barrels to reach 2251 million barrels,
while imports decreased by 194.000 barrels to record 6045 million barrels.
Analysts noted that this increase in commercial reserves has mitigated lower inventories in reservoirs in Cushing,
Oklahoma where West Texas oil is listed in New York. The decrease was nearly from 4.7 MB to 52.5 MB.
Production was stable at a rate of 11 million barrels a day.
Refineries were operating at 82.5% of capacity at an increase of half a percentage point from the previous week.
Demand slightly rose for the second week in a row: the United States consumed a total of 19,642 million barrels a day,
up from 19607 during last week.
Within 4 weeks, demand had averaged 18.9 million barrels a day,
53% less than the same period of last year.
Markets focus on China
The increasing number of Coronavirus Covid-19 cases in China is the main concern of investors in terms of demand.
Small outbreaks have emerged in the north of the country in recent weeks.
Beijing also recorded 19 people infected with Coronavirus during 7 days,
as some of them were infected with the English strain which is more contagious.
In Beijing, it seems very cautious, especially with the approach of the Lunar New Year holiday (February 11-17).
Usually, this causes a massive influx of transportation for hundreds of millions of people returning home
to spend this holiday among their families, as this is the most important and largest holiday in China.
That time of year is usually a period of significant fuel consumption at the Asian giant.
This could change this time with quarantine and social distancing measures which are already affecting
millions of people in three northern provinces.
Eugene Weinberg, an energy analyst at Commerzbank Research, said:
“The high number of new Coronavirus cases in addition to the slow progress of vaccination in some cases and the longer and more stringent restrictions on transportation in Europe is affecting investors sentiment”, concerns that the market has returned to focus on
during the recent period, and it has negatively affected the market.
Numbers make pressures on oil
According to a report released on January 14, OPEC crude production totaled 25.36 million barrels a day in December
at an increase of 278,000 barrels a day from last month.
This increase has boosted production in Libya which rose by 136,000 barrels a day to reach 1,224 million barrels a day.
On the other side, on January 19, International Energy Agency (IEA) lowered its expectations for a recovery in demand
this year despite the fact that the market was standing on a stronger core support thanks to Covid-19 vaccines.
The situation seems to be volatile and unstable.
According to International Energy Agency, World demand is expected to recover
by 5.5 million barrels a day after declining by 8.8 million barrels a day during last year.
Numbers are still far below normal levels, as the increase, this year is less than the decrease of last year,
and this by its turn may lead to the suffering of markets that are already suffering.