Analysts: Oil market sentiment is high, demand indicators show continuous improvement


Specialists and oil analysts expected the continuation of the price gains of crude oil, which occurred at the end of last week, and led to the first gain of Brent crude in three weeks, and the first rise of US crude after two weeks of declines.
Market sentiment and global demand indicators are witnessing a continuous improvement due to the spread of vaccines, and a relative decline in fears of the “delta” variable, in addition to restoring confidence in the performance of producers after the recent agreement of the “OPEC +” group to increase supply on a monthly basis starting from next August through the agreement. On a monthly increase of 400,000 barrels per day, in addition to adjusting the production baselines for five major producers in the group.
Analysts explained to Al-Eqtisadiah that the last week was particularly volatile in the oil market, after the “OPEC +” agreement to increase production in conjunction with the escalation of fears of the epidemic variable and the rise of the US dollar, but prices quickly returned to recovery again.
Citing Bank of America forecasts that Brent prices could hit $100 a barrel next year, they also quoted Schlumberger and Baker Hughes, saying the recovery in the US shale patch is likely to slow this year as companies keep spending curbs. .
In this context, Ross Kennedy, managing director of QHE Energy Services, says, “The crude oil market is closer to continuing price gains, despite the remaining fears of the virus variable, but overall it can be said: Global demand is still strong, and it is expected It should outpace supply well next year, which will help prices reap more gains.”
He added, “The “OPEC +” plan includes an increase in production by 400,000 barrels per day for the coming months, which leads to a total increase of 3.2 million barrels per day above current levels, however, the “OPEC +” group is confident that global demand will be able to absorb this. gradual increases.
For his part, Damir Tesperat, director of business development at Technik Group International, explained that this week will be more stable than last week due to overcoming last week’s turmoil, after the increase in supply, along with fears of another drop in demand related to the virus, led to lower prices. Crude oil sharply.
He explained, that the large and rapid decline in prices led to an increase in purchases, which led to the return of price consolidation, despite the fact that commercial oil stocks increased by 2.1 million barrels in the past week, noting that the return to price recovery made the “Fitch” agency for credit ratings. It expects a 3 percent increase in capital expenditures for US oil and gas companies this year, while it will rise to 9 percent in 2022 and still be below pre-pandemic levels.
“The continued rise of the US dollar may hold back oil price gains to some extent,” says Peter Bacher, an economic analyst and specialist in energy legal affairs, noting that the market may be surprised to see an increase in US oil stocks for the first time in two months, especially in the middle of the driving season. Al-Saifi, explaining that crude oil stock levels are lower than the corresponding period in 2019, as overall demand for oil and gasoline, in particular, remains strong.
He expected the demand for gasoline to decline slowly, but steadily during the next eight weeks, as all eyes will turn to the countries at the center of the spread of the variable of the epidemic, and how companies will reopen for work next fall, explaining that if there are extended concerns about the epidemic, it will lead to a significant increase in Work-from-home orders, and consequently, reduced mobility, and then the downward pressures for oil may return, and “OPEC +” may again have to limit production.
While Arvi Nahar, an oil and gas specialist at African Leadership International, said, “Global demand remains coherent despite fears that the renewed spread of the virus may halt the recovery,” expecting that the recovery has not derailed, and that global stocks will continue to shrink. , pointing out that at least in the United States and Europe we may not see a massive return to strict closures.
She pointed out that crude oil prices have risen by nearly 50 percent this year, as continuous vaccination campaigns have prompted the reopening in many countries, and the demand for gasoline has basically returned to normal in many of the largest consuming countries, noting that in exchange for Therefore, US shale oil producers and the “OPEC +” alliance maintained discipline in returning suspended supplies to the market.
On the other hand, with regard to prices at the end of last week, oil prices rose on Friday after a strong recovery from a major decline recorded on Monday, as it received support from expectations that supplies will remain scarce during the year.
The price of oil and the rest of the riskier assets plunged at the beginning of the week on concerns about the impact of the economy and demand for crude from the rise in infections with the delta strain of Covid-19 in the United States, Britain, Japan and elsewhere.
Brent crude ended the session up 31 cents, or 0.4 percent, to $74.10 a barrel, after jumping 2.2 percent Thursday. US West Texas Intermediate crude rose 16 cents, or 0.2 per cent, to $ 72.07, after gaining 2.3 per cent Thursday.
In the week, Brent gained 0.7 percent, after falling for three weeks in a row, while US West Texas Intermediate crude increased 0.4 percent, after falling for two weeks.
The two benchmark crudes fell about 7 percent, on Monday, but they reduced those losses, while investors expect demand to remain strong and the market to receive support from low oil stocks and high vaccination rates.
“Demand concerns proved to be exaggerated, which is why oil prices have since recovered,” Commerzbank said in a note. “Despite the expansion in oil supply, the oil market will remain slightly short of supply until the end of the year.”
Demand growth is expected to outpace supply after the recent agreement between the Organization of the Petroleum Exporting Countries and allies of the group known as “OPEC +” to add 400,000 barrels per day each month, starting in August.
Analysts of “ANZ” Research said in a report: “The market is beginning to sense that the increase in OPEC + will not be enough to keep the market balanced, and that stocks in the United States and OECD countries will continue to decline.” US crude stocks rose 2.1 million barrels last week, but stocks at the Cushing, Oklahoma, delivery point for West Texas Intermediate crude reached their lowest levels since January 2020.
For its part, Baker Hughes’ weekly report on drilling activities said that seven rigs rose in the number of oil and gas rigs in the United States this week, while the total number of rigs reached 491, an increase of 240 over the same period last year.
The report indicated that the number of drilling rigs in the United States increased by seven rigs this week to 387, and the number of gas rigs remained the same at 104, and the number of various rigs remained the same, pointing out that the Energy Information Administration estimates for oil production in the United States for the week ending 16 July is the same at an average of 11.4 million barrels per day, while production is still well below the peak of 13.1 million barrels per day seen in February 2020.
The total number of Canadian rigs this week decreased by 1, and Canada’s oil and gas rigs now stand at 149 active rigs, an increase of 107 from last year.


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