«Al Jazeera» – Economy:
Crude oil prices have continued to fall for the past two weeks as concerns about improving demand have once again clouded the market.
On July 12, 2022, Brent crude futures fell below $100 a barrel for the first time in three months, supported by the strengthening of the US dollar, apart from the imposition of fresh sanctions to contain the outbreak of the COVID-19 virus in China.
The dollar was at par with the euro for the first time in two decades, while the US dollar index rose to its highest level in 20 years against a basket of other major currencies. OPEC’s limited increase in supplies, as well as a fall in oil prices from the United States, tightened market conditions, while continuing sanctions on Russia contributed to restricting oil flows from the region.
This comes according to Kamco Invest’s report on the performance of global oil markets.
Expectations of a slowdown in global economic growth have had a noticeable impact on oil prices recently. Fears of a recession have prompted hedge fund managers to sell up to 201 million barrels of oil-related derivatives contracts over the past four weeks, according to records released by ICE Futures and the US CFTC. However, derivatives of refined products received strong support due to limited production capacity and low inventory levels.
At the same time, the inflation rate in the United States rose to its highest level recorded in 41 years at 9.1 percent during the month of June 2022, with interest rates expected to rise sharply in the coming months.
As per reports, most of the increase in inflation rate is attributed to increase in fuel cost which led to increase in inflation rates by 200 basis points during the month. It also prompted the US Energy Information Agency to cut its gasoline demand forecast.
In its latest short-term energy outlook, the US Energy Information Administration lowered its gasoline demand forecast for July 2022 to 9.07 million barrels per day, reflecting the impact of higher fuel prices on the driving season.
On the other hand, the outbreak of the Covid-19 virus again in China has led to the closure of many cities, in addition to severe restrictions in many major cities. The restrictions imposed in the past few months were reflected in the GDP figures for the second quarter of 2022, as it grew by 0.4 percent at the slowest pace since the Corona crisis. It also noted that while the number of cases has increased in other parts of the world, the impact on domestic demand was severe due to the “dynamic zero-covid” policy implemented by China. The shutdown affected China’s oil imports, which hit their lowest level in 4 years during June 2022, with higher oil stocks and lower refinery operating rates.
On the supply side, the Organization of the Petroleum Exporting Countries’ monthly report revealed an increase of 234,000 barrels per day during June 2022, taking the supply to 28.7 million barrels per day. The increase was mainly due to an increase in Saudi production, which was partially offset by a sharp decline in Libyan output. In addition, oil watchers have raised doubts about the increase in OPEC output and questioned the group’s excess production capacity, which fell to 4.8 million barrels per day by the end of June 2022, according to Bloomberg. The Organization of the Petroleum Exporting Countries also published its first forecast for the year 2023, indicating that non-OPEC production of petroleum liquids would increase by 1.7 million barrels per day. Growth is expected to come primarily from the United States, with an expected increase of 1.1 million barrels per day.
The US Energy Information Agency has lowered oil price forecasts for 2022 and 2023. The agency expects the average Brent crude price to reach 104.05 per barrel in 2022, which is 3.1 percent lower than its June 2022 forecast. For the year 2023, it is expected that the average Brent crude oil price is $93.75 per barrel, down 3.6 percent from the previous forecast. Average oil prices increased during the month of June 2022. The average price of Brent spot crude rose 9.2 percent to $123.6 a barrel on a monthly basis, while OPEC’s crude oil price rose 3.4 percent to $117.7 a barrel. ,
In its first forecast for 2023, OPEC sees global oil demand reaching 103.0 million barrels per day next year, an increase of 2.7 million barrels per day.
Demand from the OECD region is expected to grow by 0.6 million barrels per day, surpassing 2019 levels, while non-OECD countries will contribute 2.1 million barrels per day.
In addition to improving geopolitical developments globally and progress in containing the outbreak of the Covid-19 wave in China, all major oil-consuming countries are projected to improve economic performance next year. In terms of various product categories, demand for gasoline and diesel within the road transport sector is expected to remain strong, apart from continued improvement in jet fuel demand due to strong demand from industrial and petrochemical sectors and rising demand. Air travel around the world.
The Organization for Economic Co-operation and Development expects US countries to grow by 0.48 million barrels per day, and US consumption to rise by 0.16 million barrels per day to reach pre-pandemic levels of 20.95 million barrels per day. Mainly supported by improving fuel transport and light distillate demand.
As far as non-OECD countries are concerned, India and China are expected to be the main drivers of growth during the next year on the back of improving demand for transportation fuels and strong demand for industrial fuels including feedstocks for the petrochemical sector. reason. By comparison, the International Energy Agency expects oil demand to grow at a relatively slow pace of 2.1 million barrels per day to 101.3 million barrels per day in 2023.
oil display
Global production of petroleum liquids rose on a monthly basis in June 2022, as preliminary data indicated an increase of 1.32 million barrels per day, bringing production to an average of 99.82 million barrels per day.
The monthly increase is mainly attributable to an increase in production by Russia and the United States (+0.7 million barrels per day), while OPEC production increased by 0.2 million barrels per day.
According to its recently released monthly report, OPEC kept the non-OPEC oil liquid supply growth forecast unchanged for 2022, as it stood at 2.1 million barrels per day, raising the average to 65.7 million barrels per day. However, despite this, the forecast revealed an increase in Chinese supply (+38 thousand barrels per day) and expectations for Canada (+21 thousand barrels per day), which was offset by a drop in Norwegian supplies (-17) . thousand barrels per day) and Qatar (- 13 thousand barrels per day) and Brazil (-12 thousand barrels per day).
For the year 2023, non-OPEC oil liquid production is expected to increase by 1.7 million barrels per day, reaching an average of 67.4 million barrels per day.
Supply to OECD countries is expected to increase by 1.4 million barrels per day, reaching an average of 32.41 million barrels per day, while supplies from outside the Organization for Economic Co-operation and Development are expected to increase by 0.2 million barrels per day. On an average 32.57 million barrels per day.
Oil liquid supplies from the United States are expected to see the highest growth rate of 1.1 million barrels per day next year, followed by Norway (+0.24 million barrels per day), Brazil (+0.2 million barrels per day) and Canada (+0.2). is the location of. million barrels per day).
It is expected that oil production in the United States will increase by 0.7 million barrels per day to an average of 12.7 million barrels per day. It is also expected that production of natural gas liquids and unconventional petroleum liquids will increase by 50,000 barrels per day, reaching an average of 5.44 million barrels per day in 2023. By comparison, the International Energy Agency expects to reach global oil supplies. Record level of 101.1 million barrels per day in 2023, an increase of 1.0 million barrels per day.
OPEC production
According to data released by OPEC secondary sources, OPEC’s oil production increased by 234,000 barrels per day in June 2022 to an average of 28.72 million barrels per day, the highest level recorded since April 2020. . According to OPEC, the increase was primarily driven by higher production by Saudi Arabia, the United Arab Emirates, Iran, Kuwait and Angola, partially offset by lower production in Libya and Venezuela.
In contrast, production data from Bloomberg showed production fell by 120,000 barrels per day during the month to an average of 28.6 million barrels per day.
Oil production in Saudi Arabia rose by 159,000 barrels per day to 10.585 million barrels per day (10.45 million barrels per day according to Bloomberg) in June 2022, the second highest production rate since December 2018.
The increase in output comes after OPEC members and its allies pledged to ramp up production during the past few months to rein in fuel prices around the world.
A recent report released by Kuwait News Agency (KUNA) indicated that Saudi Arabia and Kuwait are in talks to increase production from the neutral zone from 170-175 thousand barrels per day to 500 thousand barrels per day. However, global agency sources at Standard & Poor’s indicated that there are operational challenges that could limit the field’s production to around 250-300 thousand barrels per day over the next five years.