Oil prices fall for the third consecutive week. Experts believe that the pace of oil may again return to the line in the $65 and do not rule out that “black gold” will drag him and the ruble. Why oil became too much?
Mid-July was sobering for the oil market. 16 July futures for North sea Brent was trading above $75 a barrel, and already by Wednesday, July 18, fell to $71.6 per. On Thursday, a barrel continued to fall in price and only in the evening began to improve. On Friday 20 July, oil prices remained in the positive zone. But Brent still finished with a decline of approximately 3.6%.
Oil prices declining for three consecutive weeks on concerns about slowing demand for raw materials.
Up to $100 is not reached
Oil prices almost consistently increased over the past year and a half. In December 2016, oil cost about $54 per barrel and by April 2018, Brent came close to $80 and even a few times it crossed. And if the market was a sharp jump, only up.
The fundamental basis for the rising prices was the depreciation of the dollar and the reduction of surplus stockpiles of crude oil in the world as a result of an agreement between OPEC and countries outside the cartel, believes the chief economist IK “Russ-invest” Alexander Harutyunyan. This reduction in stocks is not fully compensated by increased production of shale oil in the US, and was covered only by two-thirds. Since the beginning of the year, also increased its oil imports by China (almost 15%). In addition, there was an obvious interest of investors to oil, reflected in the increase in net long positions of hedge funds on oil contracts, said the expert.
Meanwhile, the big players since the spring began to sound the alarm about the increasing of oil, stressing that the $80 per barrel does not need any sellers or buyers. The loudest I have heard the indignant voice of Donald trump. The American President has repeatedly tweeted and public speeches demanded from OPEC to stop the prices to disperse and “to produce more oil”. But the members of the cartel kept production until June, when the OPEC meeting+ with difficulty, but still, it was decided to increase the quota for the transaction of 1 million b/d.
However, at the time this decision is not reversed the growing trend in the market. Oil was supported by Libyan militants who seized the export channel, the Norwegian oil workers, declared a strike on North sea platforms, odious statements of the Iranian politicians. Increasingly began to sound predictions about the growth of prices up to $100 per barrel and above. Their forecasts have increased and Goldman Sachs, and Bank of America and many others.
These sentiments intensified in the backdrop of the US intention to impose sanctions on Iranian oil exports that threatened the market with a loss of up to 2 million b/d.
From heaven to earth
By mid-July, the market sentiment has changed. And Brent tested the minimum values for the last three months.
Analysts note that there are several reasons.
First, the last, showed the effect of the OPEC decision to increase production: Saudi Arabia and Iran increased exports, Russia began to produce 200 thousand b/d more.
The price of Brent crude oil remains under pressure relevant for some time fears of overproduction of oil in the world economy, says a leading analyst Amarkets Artem Deev. The risk of excessive accumulation of stocks returned to the market after the resumption of oil supplies from Libya, which had previously taken the status of the region, defines the global economy in a state of shortage of raw materials, he said.
His game on the oil field continued and Donald trump. On the eve of his meeting with Vladimir Putin, Bloomberg and The Wall Street Journal reported that in case of further increase in oil prices, the White house is ready to release their strategic oil reserves of 66 million barrels. At a press conference after the talks, Putin himself said that Moscow and Washington could work together on regulation of the world market of oil and gas.
Thus the results of negotiations of presidents of Russia and USA in Helsinki has not led to significant movements in the quotations of “black gold”. Investors generally neutrally evaluated the results of the summit in terms of possible consequences for the fuel-energy sector, says financial analyst “BKS the Prime Minister” Aleksandr Taraskin.
War and slates
Now oil companies, we continue to increase oil production: according to the July 6, she has reached a level of 10.9 million barrels per day, showing an increase since the beginning of the year by 11.4%. According to the latest forecast of the energy information Administration (EIA) of U.S. Department of energy, shale extraction, USA in August, will increase in comparison with July on 143 thousand barrels per day to 7.47 million b/d. (shale accounted for 68-69% of the total production in the United States).
As for the China factor, the escalating trade war between the US and China have raised fears that the rise of protectionism in the world can undermine economic growth and reduce demand for crude oil. The escalation of the conflict will also pull quotes down.
In addition, pressure on prices has been the strengthening of the dollar on the currency market. The dollar is growing against the background of statements by the fed Chairman Jerome Powell about plans to raise key rates and published data on industrial production in the U.S., which was better than expected.
Now Brent is trading at $72-73. However, if the current negativity will increase, or added some new, the cost of a barrel could head towards $65, emphasizes financial analyst “BCS Premier” Sergei Dejneka.
Most analysts believe that at constant news backdrop, oil prices have all chances to go below $65 per barrel, but the market will remain highly volatile.
This dynamic will also have an impact on the ruble. The Russian currency is very sensitive to the cost of black gold, also can test 65-66 rubles per dollar, says the Deev.
The ruble in case of further fall in oil prices could fall to 65,5-67,5 rubles per dollar, agrees with Harutyunyan.