The actual oil war has just begun

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Saudi Arabia fulfilled its pledge to flood the market with oil; its giant tankers were loaded with first shipments of crude, to sail on its way to Europe and the United States, marking the launch of the actual oil war, after the OPEC + countries (an alliance between the Organization of Petroleum Exporting Countries) and independent producers led by Russia ), As of today, from the production cut agreement in place since the beginning of 2017. The collapse of the agreement and the coalition with it at the beginning of last month was driven by Russia’s refusal to cut oil production cuts to reduce the price drop affected by the consequences of the epidemic, which led to a price war that broke out against the backdrop of Saudi Arabia’s decision Reducing prices The sale of the official parallel to the increase in production, and consequently the collapse of the Brent and West Texas Intermediate crude.According to ship tracking data, the Kingdom loaded a number of giant oil tankers that Saudi National Tanker Company hired last month to boost its ability to increase exports. Also, Riyadh has taken advantage of the past few weeks to transfer large quantities of its oil to a storage tank near the Suez Canal, the starting point for the European market. It seems that the Kingdom is intensifying its production to reach its target of 12.3 million barrels per day, up from about 9.7 million last February, despite the American pressure. The American annoyance was first expressed by Secretary of State Mike Pompeo last week, when he asked the Saudi crown prince, Mohammed bin Salman, to “reassure the collapsed energy and money markets”, that is, to end the price war in a diplomatic language. But President Donald Trump was clearer than his secretary, expressing his concern about a war that “harms” the American energy sector: “We don’t want a dead industrial sector,” and “I never expected to say that we probably need to increase (oil) prices, but we need it.” Indeed, “because Russia and Saudi Arabia” went crazy. ” Accordingly, the American President decided that the time had come to enter the confrontation line, in an effort to curb the Saudi rush. It was agreed, in contact with Russian President, Vladimir Putin, that the current situation in the world oil markets is not suitable for either country.

Countries ’capacities to store oil are running out of what will have to close their pipelines

The contact allocated to oil and the epidemic, according to the parties ’statement, remains ambiguous in its aspects, especially regarding Moscow’s demands. It is likely that the latter will push, as Putin previously expressed, towards lifting the sanctions imposed on it, especially those related to the oil sector, in exchange for an agreement to reduce production, of which the United States will be part of to restore stability to the energy market. The call reflected positively on the market, as oil recovered yesterday after Trump and Putin agreed to hold talks at the level of energy ministers to achieve stability. And “WTI” rose by 7.3% to record 21.5 dollars per barrel, while “Brent”, the international reference, increased by 3.3% to reach 23.5 dollars. Between the abundant supply and the stagnant demand, the global oil surplus can reach 21.8 million barrels per day in the current month, 19.5 million barrels in the next month, and 13.7 million in June, according to Standard Chartered Bank, which predicted a decrease in demand. On oil this month by 18.5 million barrels per day, compared to 10.5 million in previous forecasts.
Despite an outbreak that cripples the global economy and weakens demand for oil, crude production, especially in Saudi Arabia and the United States, continues to record levels. In light of the oil glut, it appears that countries ’capacities to store are running out, which will force them to close their pipelines as a result of the surplus (about 20 million barrels). In this context, Stephen Ennis, an expert at Axi Core Financial Services, believes that oil prices are threatened by further decline with full storage capacity, and the delay in the countries concerned in finding solutions. “The sooner its response is, the greater the risk of a new drop in prices,” he says. According to Olivier Jacob from Petromatrix, “We knew that increasing production from OPEC members would put pressure on crude oil stocks … but this phenomenon clearly accelerated last week with the collapse of demand.” As a result, Kepler analysts say that the current stocks of crude oil on land and on ships “have exceeded the previous peak reached in early 2017, and these stocks continue to rise.”
And after it decided to increase its oil exports by 600 thousand barrels per day in May to reach 10.6 million (Saudi Arabia exports about 7 million barrels per day, which means that it will pump an additional 3.6 million in the oil markets), the next sign of the continuation of the oil price war will come in the fifth From this month, when Aramco will release the official selling prices for next May.

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