Prices for “black gold” benchmark marks in the course of trading on Wednesday afternoon continues to rise, while investors await data from the US Department of Energy on the reserves of raw materials in the country.
As of 13:14 Moscow time, June futures for the North Sea Brent oil blend rose 0.99% to $ 63.35 per barrel, and May futures for the West Texas WTI grade – 0.91% to $ 59.86 per barrel. In the morning, quotes were growing weaker, according to PRIME.
Nevertheless, says Arseny Dadashev, director of the Academy of Finance and Investment Management, “the general fundamental realities of the ‘black gold’ market today favor growth.”
“The world economy is recovering, and the latest indicators give hope for a good growth in global GDP by the end of the current year (albeit taking into account the low base of 2020). This, in turn, improves the outlook for demand growth, which should accelerate after the pandemic is defeated. Investments in exploration and production are declining, which implies a decrease in supply, ”the expert said in his review.
At the same time, he points out, the American Petroleum Institute (API) yesterday “reported a drop in US inventories last week by 2.6 million barrels, which is double the forecasts.”
Let us also recall that at the end of the first quarter of 2020, several waves of falling prices for “black gold” swept across the world oil market. The negative situation was caused by a whole range of factors: a general overproduction of raw materials, a sharp drop in demand amid the rapid spread of the coronavirus infection COVID-19 (a pandemic was announced on March 11) and concerns about its impact on the global economy, as well as the collapse of the OPEC + deal (officially from April 1, but in fact after fruitless negotiations between the oil-producing countries at a meeting on March 6 in Vienna).
However, on April 12, OPEC + countries agreed on a new deal, in which 23 states became participants. The agreement is designed for 2 years – from May 1, 2020 to May 1, 2022. The new OPEC + deal was a forced reaction of oil-producing countries to the market situation and pressure from the United States. However, in general, it did not cover the decline in global demand; moreover, huge reserves of raw materials have accumulated on the market.
During 2020, the OPEC + countries held meetings, adjusting the parameters of the transaction taking into account the situation on the global oil market – starting in May to reduce oil production by 9.7 million barrels per day, in August they relaxed the restrictions to 7.7 million for the period until the end 2020 year.
On January 4-5, 2021, the ministers of the OPEC + countries made a compromise decision, according to which, starting from February, Saudi Arabia will voluntarily reduce oil production by almost 1 million barrels per day within two months, to about 8.125 million barrels per day, and a few more OPEC member countries will cut production by two months by a total of 425 thousand barrels per day. At the same time, Russia and Kazakhstan got the opportunity to increase production in February and March.
On March 4, following the results of the next meeting, the OPEC + participants unexpectedly decided to maintain the current level of oil production for all countries of the alliance, except for Russia and Kazakhstan, which will be able to increase production by 130 thousand and 20 thousand barrels per day from April, respectively.
On April 1, the OPEC + countries agreed to gradually increase oil production: in May and June – by 350 thousand barrels per day, and in July – by 400 thousand barrels per day.