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Oil stops rising.. A negative start for European markets

Oil stops rising.. A negative start for European markets

Oil stops rising.. A negative start for European markets

Oil stops rising.. A negative start for European markets: Oil has seen moves between up and down over the past few days,
as the market appears to be confused between the support it receives from the stalled nuclear negotiations between the United States and Iran,
and fears of increased UAE production, which could flood the market with a huge overproduction. 

Evest follows all developments in the commodity trading market and discusses them in the following lines.

The progress of negotiations between Saudi Arabia and UAE weakens oil

Oil prices declined today, Wednesday, due to reports of the negotiations progress between Saudi Arabia and the UAE on OPEC +.

lobbying has been by alarming industry statistics from the US Department of Energy.

News has spread in the media that Saudi Arabia and the UAE have reached a compromise on the contentious issues of the OPEC + agreement.

The deal is to be extended until the end of 2022, but the basic level at which production cuts are calculated for the UAE will increase from 3.2 million to 3.65 million barrels per day.

In fact, this means an impressive growth in UAE production from May to December 2022 of about 0.45 million barrels per day.

Sudden increases and decreases in oil prices

In 2021, OPEC + could increase production by 2 million barrels per day from August to December, as discussed earlier.

Shortly thereafter, the United Arab Emirates issued a statement, confirming that “no agreement has been reached with OPEC + yet,” and discussions are continuing. 

This statement may mean that not all key participants in the transaction have expressed their approval of the proposed plan.

In addition, to officially ratify the agreement, it is necessary to convene an extraordinary meeting of all OPEC + members, the date of which has not yet been announced.

This means that there is still uncertainty in the case, although the underlying scenario has already been determined.

The main risk is that after the UAE, other members of the coalition will demand a revision of their shares, which is fraught with a greater increase in production.

Experts note that since the cancellation of the meeting, abrupt oil price increases and declines have been observed,
and persistent supply-side uncertainty suggests a rapid contraction in the market where demand is rising.

For its part, industry statistics from the U.S. Energy Administration were mixed yesterday.

U.S. crude inventories declined for the eighth week in a row,
but gasoline inventories and distillation products rose despite the decline in refinery usage from 92.2% to 91.8%. 

Total supplies of petroleum products, an indirect indicator of demand, declined to 19.3 million barrels (-2.2 million) last week.

Production continues to grow

In addition, production continues to grow, reaching 11.4 million barrels per day by the end of last week.

If this level turns out to be stable, U.S.

production forecasts in 2021 and 2022 will also be revised towards growth. 

The market ignored another wave of decline in U.S. commercial oil reserves,
apparently because of disappointment at the lack of compromise in OPEC +,
as well as data from the U.S. Department of Energy on U.S. oil production growth to 11.4 million barrels per day.

West Texas Intermediate crude declined significantly on Wednesday, and as a result,
the difference between Brent and West Texas Intermediate crude expanded from $1.2 to $1.6 per barrel.

September futures for the North Sea oil mix Brent fell by $0.62 to $74.14,
and August futures for the WTI crude – by $0.64 to $72.49 per barrel.

At the same time, there are seasonal risks to U.S. production in the third quarter due to hurricanes in the Gulf of Mexico,
so EIA forecasts of 11.17 million barrels per day do not seem to have been underestimated so far.

Brent crude futures fell below $75 per barrel on Wednesday,
reflecting OPEC + production growth forecasts and signs of weak demand in the United States. 

Other news included talks on a nuclear agreement between the United States and Iran. 

Iranian oil and gas sector

Apparently, the stalled talks will continue until mid-August, when the new Iranian president officially takes office. 

The new President of the Islamic Republic is committed to a diplomatic hard line in relations with the United States, so negotiations can be difficult. 

With regard to oil prices, this is an addition, because, without successful negotiations,
sanctions on the Iranian oil and gas sector will remain in place,
impeding about million barrels per day of Iranian production.

On the other hand, China’s oil refining volume in June increased by 5.1% on an annual basis to 14.8 million barrels per day. 

Chinese refineries gradually re-operate after the maintenance season.
The increase in processing in China indicates the potential for increased demand,
but this factor is seasonal in nature, so it was expected. 

The total refining capacity in China was 15.13 million barrels per day in the first half of 2021.

European stocks start the session lower 

European equities are trading lower on Thursday morning,
as investors fear higher inflation for longer and more intense than central banks expected.

The Stoxx 600 – the index with the 600 largest companies in the region – fell by 0.3% in these opening minutes, with most sectors losing power.

Despite the declines, the Stoxx 600 remains close to historic highs.

Investors are closely watching the start of the earnings season, on the day Daimler, the owner of Mercedes,
posted a 2% profit after announcing higher than expected figures in the second quarter.

On the other hand, Siemens, who lost 10 percent after warning that third-quarter results would fall short of expectations.

Siemens Gamesa stock also fell by 15%.

 

Oil stops rising.. A negative start for European markets

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