Analysts: Oil market fundamentals are improving and herald stronger performance in the second half


Oil analysts expected the continuation of price gains for crude oil this week, after the week ended at the highest level in two years, and Brent crude exceeded the level of $ 72 a barrel due to the widespread optimism about the recovery of global demand for crude oil and fuel, supported by strong economic data from the United States and China.
He explained to “Al-Eqtisadiah”, specialists that the recent “OPEC +” meeting contributed to supporting market sentiment on a large scale as a result of confirming confidence in the impact of the spread of Corona vaccines and the return of tourism and travel and transportation, especially in the current summer season.
The specialists stated that the fundamentals of the crude oil market are gradually improving and heralds a stronger performance in the second half of the year, although Asia, the most important oil importing region in the world, is still suffering from the spread of the pandemic, and then weak demand and declining refining margins, as the severe wave of the Corona epidemic led to lower demand for fuel in India and other South Asian markets.
Specialists noted that positive market indicators include the decline in OECD stocks, with the continued economic recovery in most parts of the world in light of the acceleration of vaccination programs, expecting that the crisis in Asia will not stand as a major obstacle to the rise in global demand for oil by the end of this year.
In this context, Ross Kennedy, managing director of QHI Energy Services, says that “OPEC +’s decision to move forward with easing production restrictions and adding 840 thousand barrels per day in July led to a recovery in demand growth expectations, and thus a rise in demand.” Crude oil futures prices hit a two-year high.
He pointed out that the recovery of Asian markets will give a strong boost to the oil markets if the crisis is contained in the shortest possible time. Despite these headwinds, both OPEC and the International Energy Agency are betting on recording a strong rise in global demand for oil in the second half of this year.
Damir Tesperat, director of business development at the international company “Technic Group”, adds that “the “OPEC +” group succeeded in raising the level of compliance with the production cut quotas on a continuous monthly basis, and it recorded in the latest data 115 percent, and Russia also confirms that its compliance with the “OPEC +” cut. It was almost 100 percent last May,” noting that the group takes into account that the Indian health crisis has led to a decline in refinery operating rates.
He pointed out that international reports expect June imports to remain weak in the third largest oil importer in the world, but consumption is expected to return to its previous track next July, according to estimates by the US Energy Information Administration, noting the strong market confidence that the repercussions of The pandemic thanks to the spread of vaccines around the world, especially that the recovery in demand is clearly visible in the United States and Europe.
“The driving season in the United States plays a major role in increasing the positive atmosphere in the crude oil market, especially after gasoline demand in the United States jumped by 6.8 percent this week, and it rose by 9.6 percent,” said Peter Bacher, an economic analyst and specialist in energy legal affairs. Above the average of the last four weeks than demand in the summer of 2019.”
He stated that the market sentiment is strongly supported by the estimates issued by “OPEC” and the International Energy Agency, which confirm that global demand for oil is expected to return to pre-pandemic levels within a year, noting that the most important thing that helps stabilize the market is the discipline of drilling activities in the states. Despite the increase in prices, the number of American drilling rigs is shrinking for fear of the successive market developments and the difficulties of recovering Asian demand.
In turn, Arvi Nahar, an expert in oil and gas affairs at African Leadership International, indicates that the current strong demand is very promising for the rapid recovery of the crude oil industry, especially in the United States, Europe and China, especially with the expectation of the “OPEC +” group, at its last meeting, about a return to demand levels what Before the epidemic, about one hundred million barrels per day.
She pointed to the assurances of “OPEC +” that the demand for oil is scheduled to grow by six million barrels per day to an average of 96.5 million barrels per day this year, and “OPEC” also suggested that demand would exceed 99 million barrels per day in the fourth quarter of this year, which means A full recovery from all the difficulties of the pandemic phase over the course of a year and a half.
On the other hand, with regard to prices at the end of last week, oil rose towards $ 72 a barrel on Friday to trade near its highest levels in two years, as the “OPEC +” plan on supplies and the recovery of demand overshadowed concerns about the irregular activity of vaccinations against Covid-19. globally.
The Organization of the Petroleum Exporting Countries, “OPEC” and its allies, said, “They are proceeding with the agreed supply constraints,” and Thursday’s weekly supply report showed that US crude stocks fell more than expected last week.
Brent crude rose 33 cents, or 0.5 percent, to $71.64 a barrel by 08:12 GMT. On Friday, it reached its highest level during the session at $ 71.99, its highest level since May 2019. US West Texas Intermediate crude rose 22 cents, or 0.3 percent, to $ 69.03. On a weekly basis, Brent crude recorded an increase of more than 2.8 percent, and West Texas Intermediate, an increase of 4 percent.
On the other hand, Baker Hughes said Friday that the number of oil and gas rigs in the United States decreased this week, bringing the total number of rigs to 456, which is still more than a hundred rigs higher since the beginning of the year.
The company’s weekly report indicated that in the previous week the number of oil and gas rigs in the United States increased by two, but the longer trend in rig count additions bodes well for the oil industry in the United States, as the number of rigs is rising.
“American prospectors have added 105 rigs so far this year and more than half have been added in Texas,” he added, noting that the total number of active oil and gas rigs in the United States is now 172 more than this time last year.
He pointed out that the number of oil rigs remained unchanged this week at 359, and the number of gas rigs decreased by one for the second week in a row to 97, while the number of various rigs remained unchanged.
The report pointed out that the Energy Information Administration’s estimates of oil production in the United States for the week ending May 28 – the latest available data – fell to an average of 10.8 million barrels per day compared to the peak production of 13.1 million barrels per day reached in February 2020 before the epidemic crushed demand for oil. oil.


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