Oil analysts expected the volatility of crude oil prices to continue this week due to fears of economic stagnation and weak market sentiment, which caused price losses for three consecutive weeks.
They explained to Al-Iqtisadiah that oil prices, in turn, receive some support from the summer driving season and the air travel return. In addition to the shrinking of stocks, export disruptions in Libya exacerbated global supply concerns.
Crude oil ended June trading 8 per cent down from the previous month when investors were concerned about a possible global economic slowdown.
OPEC recorded the second consecutive monthly decline in production. The Libyan exports also fell to about a third of last year’s level after the political crisis worsened, which led to the suspension of shipments from two of the largest ports in the country.
The specialists expected that the rise in oil prices would not be close to its end. However, the significant gains month after month in crude prices may have ended, at least for the time being, according to their expression, as recession fears led to double losses last June, while, on the other hand, crude oil prices ended the second quarter high.
In this context, Ross Kennedy, managing director of QHA Energy Services, says that oil prices will continue to fluctuate with a tendency to rise as the political crisis in Libya leads to a sharp decline in oil exports. Citing that high oil prices raise concerns in the US administration, pushing for cheaper gasoline at home and urging its companies to take action to bring costs down.
He pointed out the continued scarcity of supplies from some producers, such as the decline in Nigeria’s production – for example – by 100,000 barrels per day to 1.2 million barrels per day. Which is the lowest level since the country joined the ranks of the major producers, in addition to the continued tightening of markets that suffer from the Russian low oil shipment.
As for Damir Tesperat, director of business development at the international “Technic Group” company, he said that the market is in a state of tension, which means that prices will continue to fluctuate, pointing to European refiners buying more oil shipments, fearing a decline in supplies.
He pointed out that the “OPEC +” alliance approved last week to increase oil production for August, despite the interruptions and investment difficulties in light of this turbulent market.
Peter Bacher, an economic analyst and specialist in energy legal affairs, explains that fears of recession and slowdown, which widened after raising interest rates, have not affected global demand, as demand in the United States remains strong. In addition, the record number of drivers is expected to reach the road at the end of this week to travel on Independence Day, which will support gasoline consumption.
He noted that oil prices started strongly to decline later due to economic growth concerns and bearish news of supply and demand last week. Noting that high energy prices contribute to high inflation; therefore, the US Federal Reserve raises interest rates, which could decline the economic growth, and may reduce power consumption…
In turn, ArviNahar, a specialist in oil and gas affairs at the international company “African Leadership,” says that the market is still waiting for more barrels, especially after the escalation of demand growth, as China lifted the Corona pandemic restrictions, the increase in refined products stocks, coupled with the US oil production increased which led to lower prices.
She added that the factors affecting the crude oil market are many and intertwined, and they must be monitored well, on top of which are the conflict between Russia and Ukraine, high inflation rates, the summer driving season and the pace of demand recovery in China.
Concerning prices, at the end of last week, oil prices fell on Friday, July 1, amid persistent fears of stagnant demand that cast a shadow on sentiment and put the benchmark crude on the path to incurring a third consecutive weekly loss.
Brent crude futures fell 20 cents, or 0.2 per cent, to $108.83 a barrel, giving up more than a dollar gains earlier in the session. West Texas Intermediate crude futures for August delivery fell 37 cents, or 0.4 per cent, to $105.39 a barrel, giving up earlier gains during the session amounting to about a dollar, and the two crudes fell by about 3 per cent on June 30.
The “OPEC +” bloc, which includes the Organization of the Petroleum Exporting Countries “OPEC” and independent producers, including Russia, agreed to abide by the applied production policy after 2-day meetings. However, the bloc avoided discussing the production policy from September onwards.
And “OPEC +” had decided to increase production by 648,000 barrels per day in July-August, an increase from the previous plan to increase production by 432,000 barrels per day month on month.
On the other hand, the total number of active drilling rigs in the United States decreased by three this week, as the total number of rigs decreased to 750 this week – 275 rigs higher than the number of rigs this time 2021.
The American company “Baker Hughes” weekly report concerned with drilling activities indicated that oil rigs in the United States rose by one this week to 595, and gas rigs decreased by four to 153. The various rigs remained unchanged at two, however.
The report pointed out that the number of rigs in the Permian Basin remained unchanged this week at 349, while the number of rigs in the Eagle Ford decreased by four to 68, and the number of oil and gas rigs in the Permian was 112 higher than it was this time last year.
The report noted that crude oil production in the United States rose to 12.1 million barrels per day in the week ending June 24 – the highest level since April 2020, when the epidemic spread.