Coronavirus Has Wiped Out A Decade Of Oil Demand Growth

[Pitcher]

https://oilprice.com/Energy/Crude-Oil/Coronavirus-Has-Wiped-Out-A-Decade-Of-Oil-Demand-Growth.html
 

Coronavirus Has Wiped Out A Decade Of Oil Demand Growth

By Nick Cunningham - Apr 15, 2020, 7:00 PM CDT

Just days after the largest production cut in history, WTI fell below $20 per barrel. 

The oil world was hyper-focused on what OPEC+ might do over the past week, and on what the Texas Railroad Commission might do as a follow-up measure. The cuts are massive. OPEC+ alone will cut by nearly 10 million barrels per day (mb/d). The market-induced contraction will make the output declines even larger.

But the destruction in oil demand is both larger and much more immediate. April demand is expected to be down by 29 mb/d, according to the International Energy Agency (IEA). Oddly, so many forecasts from investment banks have predicted a V-shaped recovery for the global economy, but that scenario appears increasingly optimistic. 

“The global economy is under pressure in ways not seen since the Great Depression in the 1930s; businesses are failing and unemployment is surging,” the IEA wrote in its April Oil Market Report, its first since lockdown measures went truly global. “Even assuming that travel restrictions are eased in the second half of the year, we expect that global oil demand in 2020 will fall by 9.3 million barrels a day (mb/d) versus 2019, erasing almost a decade of growth.”

The IEA assumes a version of a V-shaped recovery, although it says demand will be down for the rest of the year, including down 26-mb/d in May. For the full-year, the IEA sees demand contracting by 9.3 mb/d. 

 

We just released @IEA’s latest monthly Oil Market Report. The numbers are staggering.

Global oil demand is set to plunge by 29 mb/d in April. Even if lockdowns ease in 2nd half, we expect demand to drop by 9 mb/d in 2020, erasing years of growth.

??https://t.co/lZcV1nFMzJ pic.twitter.com/gdO5kM73EY

— Fatih Birol (@IEABirol) April 15, 2020

Against this backdrop, the OPEC+ deal is unable to engineer an immediate rebound in prices. “There is no feasible agreement that could cut supply by enough to offset such near-term demand losses,” the IEA said. However, the agency said the OPEC+ deal was a “solid start” that could reduce the buildup in inventories. 

Premium: There Is Still Hope For Oil Prices

Because the OPEC+ deal falls far short of the decimation in demand, more supply cuts are coming, whether or not governments mandate them. With pipelines and storage tanks filling up, local prices are crashing. Western Canada Select has been trading in single digits since late March – WCS is currently below $5 per barrel. 

WTI in Midland is as low as $10 per barrel, while West Texas Sour in Midland has plunged to $7 per barrel. These are prices that force immediate shut ins. 

The U.S. shale industry spent Monday arguing over whether or not the Texas Railroad Commission should regulate production. “Nobody wants to give us capital because we have all destroyed capital and created economic waste,” Scott Sheffield of Pioneer Natural Resources told the Texas Railroad Commission. “If the Texas Railroad Commission does not regulate long-term, we will disappear as an industry like the coal industry,” he said. That comment comes after years of shale executives boasting of low breakeven prices. 

But the notion of regulation enraged other oil executives, some of which implied that producers may be trying to find a legal loophole out of their contracts. Diamondback Energy even threatened to cease all operations if Texas regulators imposed production cuts. “Diamondback will not be using any service providers to drill, complete or produce wells during the proration period,” Diamondback’s CFO Kaes Van’t Hof said, warning of “a sector with zero revenue and zero employment.”

It likely matters little what the Texas RRC does. Output declines are coming one way or another. 

Global upstream investment is expected to contract by 32 percent this year, falling to $335 billion. The first to cut will be in the U.S. and Canada. “Heavily indebted independent US upstream companies had already signalled a 10% y-o-y cut in investments but it is now likely that spending will fall by 30%-40% to free up cash for service repayments,” the IEA said. 

The agency said that roughly 2.2 mb/d of U.S. oil supply cannot even cover operating costs with WTI at $20 per barrel, including 1.2 mb/d of conventional supply. Another 1.3 mb/d of losses could come from the steep declines in existing shale production. 

[Pitcher]

Iraq's Kurdistan region must reduce output in line with OPEC+ pact: oil minister

 

https://www.spglobal.com/platts/en/market-insights/latest-news/oil/041520-iraqs-kurdistan-region-must-reduce-output-in-line-with-opec-pact-oil-minister
 

Highlights

Dubai — Iraq's semi-autonomous Kurdish region must reduce its output in line with the OPEC+ pact, which includes a 1.061 million b/d cut for OPEC's second-largest oil producer in May and June, the country's oil minister said on Tuesday.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

"A [Kurdish] technical delegation will sit with representatives from the oil ministry Thursday to discuss how to implement the reduction," Thamer al-Ghadhban told state-run TV on Tuesday.

The region is exporting around 500,000 b/d, accounting for most of its production, al-Ghadhban added.

The Kurdish region in northern Iraq markets and sells its own oil while the federal government in Baghdad markets its oil through marketer SOMO.

The two governments in Erbil and Baghdad have often clashed over the sale of oil and distribution of oil revenue.

The 23-country OPEC+ alliance agreed on Sunday to rein in 9.7 million b/d of crude oil production for May and June. The collective OPEC+ cuts will ramp down to 7.7 million b/d for the second half of 2020, then to 5.8 million b/d for all of 2021 through April 2022.

Iraq's total March crude exports, including those from the Kurdish region, were 3.88 million b/d, little changed from 3.874 million b/d in February, according to official data.

The March total consisted of 3.39 million b/d of federal exports and 490,000 b/d of oil from the Kurdish region, compared with 3.391 million b/d and 482,000 b/d respectively for February.

Iraq pumped 4.65 million b/d in March, above its 4.46 million b/d quota under the previous OPEC+ agreement that expired last month, according to the latest S&P Global Platts OPEC survey.

Iraq's oil production in early April was relatively steady from March, the International Energy Agency said in its monthly oil report released on Wednesday.

"Tanker tracking data show early April exports of southern Basra crude holding steady at around 3.3m b/d, with shipments from the north falling by about 200,000 b/d m-o-m," it said.

IRANIAN GAS

Iraq, which imports Iranian gas for power generation as well as electricity, also expects the US to extend a waiver and allow Baghdad to continue to use gas from Tehran to avert electricity shortages in the country, Ghadhban said.

"I do not expect that the waiver will end," Ghadhban said, adding that the US understands Iraq's situation.

Electricity shortages, particularly in the summer months in the south where temperatures can reach 50 degrees Celsius, have in the past led to protests.

The Iraqi oil ministry needs Iranian gas despite signing a number of agreements to treat associated gas because these projects will take at least two to three years to be implemented, he said.

In March, the US extended a waiver allowing Iraq to import Iranian electricity and natural gas despite US sanctions, Morgan Ortagus, a State Department spokeswoman, said, without specifying the duration of the waiver.

The March extension will be the seventh waiver the US has issued for Iraq since US sanctions on Iran energy exports snapped back in November 2018. After an initial 45-day waiver, the State Department issued two 90-day waivers in a row followed by two 120-day waivers in a row in June and then October. It most recently issued a 45-day waiver in February.

[Pitcher]

https://www.thebaghdadpost.com/en/Story/47892/COVID-19-outbreak-low-oil-prices-put-Iraq-s-stability-at-risk-report
 

COVID-19 outbreak, low oil prices put Iraq's stability at risk: report

In an alarming prophecy, the Economist, a British renowned magazine, warned of the repercussions of the drop in oil prices on the Iraqi economy. 

It said that Iraq will face severe risks due to the spread of coronavirus amid low oil prices, calling on the government to find a way out of the looming crisis.

In a report, the British magazine said that cars still pack the roads, pilgrims still pray at shrines and people still gather in shops. Many see covid-19 as either a hoax or a fast track to paradise, so they feel no obligation to comply with the government’s order to stay inside. 

The government itself seems unprepared. Iraq claims to have just 1,122 cases of the virus, but it is accused of minimizing the number. Its public hospitals are not equipped to handle a big outbreak.

If the virus was Iraq’s only problem, that would be enough. Alas, the country is nearly bankrupt—the result of a precipitous decline in the price of oil, which supplies more than 90% of government revenue. Its politics are also a mess, with parties unable to agree on a new prime minister. Iraq’s militias are running amok, while the ISIS terrorists regroup.

America and Iran, which helped Iraq muddle through past crises, are focused on fighting each other. Fears are growing that the state will collapse, says an Iraqi official.

Saudi Arabia and Russia are in talks over oil-production cuts, which would provide some relief to Iraq by raising prices. But even if the price of oil jumps by half, Iraq would still be looking at a sizeable budget deficit.

As it is, the government cannot afford to pay salaries in the ever-expanding public sector. It has around $60bn in cash reserves, but that could run out by the end of the year, leaving it dependent on a loan from the IMF, which may not be forthcoming. 

The state’s 7m employees and pensioners are worried. “Without salaries, that’s the end of Iraq,” says Mowaffak al-Rubaie, a former national-security chief.

That may sound alarmist, but Iraq does not have much of a private sector to fall back on. Many firms rely on government contracts. Much of the sector is informal. With a curfew in place, travel restricted and the borders closed, commerce has slowed considerably. 

Even before the virus, many Iraqis struggled to get by. Such hardship, along with blatant corruption, sparked big protests, beginning last year.

Finally, some observers stressed the need to rapidly move to find out solutions to the crisis in Iraq and to face the repercussions of the deadly virus and the drop in oil prices.

[horsesoldier]

If Iraq is considered “ Stable “ .... I’d hate to see what “ Unstable “ looks like. 

[Rochester]

My view is all this recent bad new in Iraq, is good news for us. Oil demand is down? Good. That means Iraq gets less money. Sometimes less money is better. Why? Because: What has caused such stagnation in Iraq was in party, they had too much money coming in. It's fine if you work hard and are honest and contribute to the world, it's fine then to get a lot of money...you earned it. But if a person is useless and corrupt and does very little for his fellow human beings...and money is easy to come by, that situation often destroys human beings.

 

Such was the case with Iraq. The elite does very little that is useful, but they got paid truck loads of money for doing very little. They enjoy a high standard of living, but they didn't earn it. All this unearned massive wealth contributed to a lazy, spoiled elite class in Iraq, that can't get along with each other, can't do anything for their own people.

 

If too much easy money is a problem, then logically too little money should help correct all that. Good. Let them suffer. I'm not wishing suffering on them, I'm just pointing out, they are bringing suffering on, themselves. I'm a fan of The 3 Stooges. I won't interfere with a man punching himself in the head or who keeps standing on a rake.

 

Hey idiot Iraqis: stop hitting yourself in the head with a rake.

 

....oh wait......never mind...lol

 

They have self-induced suffering, greed induced suffering. I don't wish anyone to suffer, but if people are given every opportunity in the world to do well, but they stubbornly refuse the blessings in front of their face, let them suffer. They put it on themselves. Let the international bank loans dry up. Let the income in Iraq fall. The low oil price may cause riots in the street. Good. Maybe a few more thousand rakes in the head will teach them, what a 6 year old should be able to grasp. Maybe hard times will teach them what unearned wealth and unearned blessings has not taught them...due to their stubborn ignorance.

 

As to Covid-19, I'd just point out that the median age in Iraq is 20 years old....a very low number. They have a very young population. Very few Iraqis will die from it. 

[DinarThug]

3 hours ago, horsesoldier said:

If Iraq is considered “ Stable “ .... I’d hate to see what “ Unstable “ looks like. 

Actually Iraq Is Considered A ‘Camel Stable’ !  
 

 

 

Though Clearly Mentally Unstable ...

 

     

[horsesoldier]

34 minutes ago, DinarThug said:

Actually Iraq Is Considered A ‘Camel Stable’ !  
 

 

 

Though Clearly Mentally Unstable ...

 

     

 

That's gosh damn funny stuff right there 

[DinarThug]

11 minutes ago, horsesoldier said:

That's gosh damn funny stuff right there 

 

 

 

     

[TOMINVEGAS]

Well said, Rochester!!!

[horsesoldier]

9 hours ago, DinarThug said:

 

 

 

     

 

Car pooling to work with friends .... cute & sexy ones at that.

[jcav]

Sexy is right.  I bet they can hump all day long with few water breaks.  

[DinarThug]

LINK

Oil rises after hitting its lowest level in 18 years, but prospects for demand dampen it

 

16th April, 2020

 

Oil rose on Thursday after sharp losses in the previous session on hopes that a significant increase in US stocks may mean that producers have little choice but to deepen production cuts as the Corona Virus pandemic crushes demand

With the release of official data that showed US crude inventories rose by the largest amount ever, US Texas West crude fell on Wednesday to its lowest level since February 2002, while Brent crude fell more than six percent

Brent crude rose 36 cents, or 1.3 percent, to $ 28.05 a barrel by 0502 GMT. US West Texas Intermediate crude rose ten cents, or 0.5 percent, to $ 19.97

Fears of a weakening demand dampened gains as the benchmarks, trading more than 2.5 percent earlier in the session, were traded

The US Energy Information Administration data also showed a significant increase in refined fuel stocks in the United States, although refineries operate at a capacity of 69 percent across the country, the lowest level since September 2008

The data comes after a report by the International Energy Agency expected oil demand to drop by 29 million barrels per day in April to reach its lowest level in 25 years, which is just under 30 percent of global demand before the outbreak of the Corona virus

This figure is higher than the impending production cuts. The Organization of Petroleum Exporting Countries (OPEC) and allied producers, including Russia, in what is known as the OPEC + group, agreed to reduce production by 9.7 million barrels per day, while it is hoped that other countries, including the United States, will reduce production by another ten million barrels per day, which will reduce production. To 20 million barrels per day

Last week, the Energy Information Administration said that US production is expected to drop 470,000 bpd

[trident]

1 hour ago, DinarThug said:

oil demand to drop by 29 million barrels per day in April to reach its lowest level in 25 years, which is just under 30 percent of global demand

 

1 hour ago, DinarThug said:

This figure is higher than the impending production cuts.

more pain for the oil industry yet to come imo

[Pitcher]

https://oilprice.com/Latest-Energy-News/World-News/Oil-Falls-As-Saudi-Arabia-Launches-New-Price-War-With-Record-Discounts.html
 

Oil Falls As Saudi Arabia Launches New Price War With Record Discounts

By ZeroHedge - Apr 14, 2020, 2:30 PM CDT

This weekend's 11th hour decision to cut OPEC oil output by 23% was supposed to end the oil price war between Saudi Arabia and the rest of OPEC+, but it appears Saudi Arabia did not get the memo.

While oil production may (or may not) be cut by 9.7mmb/d on May 1, Riyadh remembered that to capture market share one can manipulate volumes, which are now set as per this weekend's OPEC+ agreement or one can adjust price discounts, which are not. And as the kingdom faces stiff competition from rival suppliers for market share in the prized Asian market (or at least what's left of it after India cut demand by 70%), the OPEC leader slashed its official selling prices to Asian customers for May by larger-than-expected margins this week, while keeping prices flat for Europe and raising them for the United States.

On Monday, Saudi Arabia’s oil giant Aramco set the May price for its Arab light crude oil to Asia at a discount of $7.3 to the Oman/Dubai average, down $4.2 a barrel from April, according to a document seen by Reuters. Asian refiners had called on Saudi Arabia to slash its crude OSPs for a third straight month in May after Middle East benchmarks and refining margins dropped amid ample supplies and lower demand due to the coronavirus. Overnight, China’s customs bureau reported that overseas energy purchases weakened in March as demand from the top importer took a hit from the coronavirus pandemic. Crude oil imports fell to the equivalent of about 9.72 million barrels a day, the least since July.

While Aramco cut Asian prices in hopes of beating Russia, Iran and other producers to the punch, it raised the May OSP of its Arab light crude oil to the United States to a discount of $0.75 per barrel versus the Argus Sour Crude Index (ASCI), up $3 a barrel from April, according to the document.  Aramco left its OSP for Arab light crude oil to Northwestern Europe unchanged from April at a discount of $10.25 per barrel to ICE Brent.

Premium: A Global Oil Cartel?

The cut in prices to Asia reflect weak demand, while OSPs to Europe and the United States reflect oil market fundamentals and the global supply cut pact, an industry source familiar with the pricing process told Reuters.

Then on Tuesday morning, Saudi Aramco again cut official selling prices of all four grades to new record lows from Egyptian port of Sidi Kerir for May, in line with big cuts in prices for other customer regions, with some grades sold at a discount of as much as $10.95/bbl:

• Arab Light OSP set at $9.85 discount to ICE Brent, vs -$8.40 for April
• Arab Extra Light also at -$9.85/bbl vs -$5.60/bbl
• Arab Medium -$10.95/bbl vs -$10.20/bbl
• Arab Heavy -$10.95/bbl vs - $10.50/bbl

Prices of all four crude grades from Sidi Kerir are 45c higher than those shipped from Ras Tanura in Persian Gulf for customers in Mediterranean, compared with 20c higher in April’s price list.

And so, between the IMF's warning earlier today, and Saudi Arabia's quiet restart of the oil price war, Brent tumbled by over 5.5% this morning, sliding below $30, after hitting a high over $36 just two trading days ago as the unprecedented chaos in the energy market continues.

 

 

[Pitcher]

https://oilprice.com/Latest-Energy-News/World-News/Power-Demand-In-US-Falls-To-Nearly-Two-Decade-Low.html
 

Power Demand In U.S. Falls To Nearly Two Decade Low

By Julianne Geiger - Apr 16, 2020, 11:30 AM CDT

As stay-at-home orders keep businesses shuttered across much of the United States, electricity demand has fallen to a near 17-year low, according to analysts at the Edison Electric Institute (EEI) trade group, as cited by Reuters.

Over the last week ending April 11, US power output fell to just 64,177 gigawatt hours—down 6.1% for the same week last year, and the lowest weekly output since mid-2003.

This drop in power demand is coinciding with a drop in prices as well, leading to a sell-off in wholesale US electricity markets, according to the Financial Times. It will mean a smaller bottom line for power companies, which some suggest may shift demand away from fossil fuels and toward wind and solar.

Power futures, according to data from Nodal Exchange cited by FT, have dropped between 22 percent and 37 percent over the last two months.

New York City and California are the two markets taking the hardest hit to power demand. In New England, according to the regions electric grid operator ISO New England, electricity demand has fallen between 3% and 5%, pushing prices to new lows.

The EIA has estimated that the virus lockdowns and subsequent economic slowdown would reduce commercial sector power demand by 4.7% over 2020. Industrial demand, the EIA estimates, will sink 4.2%.

U.S. power consumption overall in 2020 is expected to fall 3%, the EIA said.

Power demand isn’t the only thing falling in the United States. The price of a barrel of WTI crude oil fell below $20 per barrel as of Wednesday, the lowest level in 19 years as the coronavirus pandemic and chronic oversupply continues to wreak havoc in the oil markets.

 

[DinarThug]

LINK

Abdul Mahdi’s advisor depends on the recovery of oil prices to achieve a condition

 

 

 

17th April, 2020

 

A financial advisor to the resigned Prime Minister, Adel Abdel Mahdi, considered on Friday that the recovery of oil prices in global markets depends on the commitment of producers in OPEC and outside the agreement to reduce production

And OPEC Plus agreed, on Sunday, to an unprecedented reduction in production equivalent to about 10 percent of global supply, to support crude prices that fell in the midst of the Corona pandemic

In the recent period, oil prices have fallen significantly due to the Corona epidemic, which has paralyzed the global economy and imposed quarantine and travel restrictions on billions of people around the world

The consultant, Mazhar Muhammad Salih, said in a special statement to Shafaq News that "oil prices will recover if countries abide by the OPEC agreement to reduce global production

He added that "the rise in prices is related to the amount of those countries' commitment to the oil agreement," stressing Iraq’s commitment to the decisions issued by OPEC, and will work to reduce production

Saleh pointed out that "Brent crude prices may reach $ 50 per barrel in the coming period

Under the agreement, Iraq will reduce its production by about one million barrels per day

Iraq is the second largest producer in "OPEC" after Saudi Arabia, and produces about 4.5 million barrels per day, of which about 3.5 million barrels per day go for export

And Iraq’s revenues from selling oil fell sharply in March, if it amounted to about 3 billion US dollars, down from about 5 billion dollars in the previous month

Iraq relies on revenues from the sale of oil to finance up to 95 percent of the country's expenditures

 

############

LINK

Abdul Mahdi’s advisor mortgages the recovery of oil prices,
on condition

[DinarThug]

LINK

Iraq seeks to add one billion cubic feet of gas associated with oil operations

 

 

17th April, 2020

The Iraqi Oil Minister revealed that the Ministry is seeking to add about a billion standard cubic feet of associated gas to national production.

Thamer Al-Ghadban said to the Iraqi News Agency (INA) today, Friday, that the Ministry of Oil is committed to the optimal investment of gas associated with oil operations in order to cover the local need, including supplying electric power plants, and stopping the import of energy from abroad.

The Minister pointed out that the Ministry signed two major contracts last year to invest gas with a capacity of 750 million cubic feet standard in the fields of Halfaya in Maysan Governorate and Ratawi field in Basra Governorate.

Al-Ghadban added that the ministry concluded another contract before forming the current government to invest gas in the fields of Al-Gharaf and Al-Nasiriyah in Dhi Qar Governorate with a capacity of 200 million standard cubic feet, noting that these contracts represent an important step for adding new production rates to the gas sector in Iraq aimed at producing about one billion standard cubic feet per day Of gas supplied to power plants and all industries related to gas uses.

Al-Ghadban stressed the seriousness of the government and the Ministry of Oil in achieving self-sufficiency in gas and dispensing with its import, noting that the ministry is also working on developing the crutch and Mansuriyah fields to produce free gas, and this will add additional production capabilities of gas.

It is reported that Iraq has reached self-sufficiency in producing liquid gas "cooking gas" and condensate.

 

###########

LINK

Iraq seeks to add one billion cubic feet of gas associated
with oil operations

 

17th April, 2020

[DinarThug]

LINK

The Iranian president orders to stop selling crude oil

 

 

 

17th April, 2020

 

 

Iranian President Hassan Rouhani on Friday ordered the oil minister of his government, Begin Namdar Zangana, to stop selling Iranian crude oil.

The Iranian presidential website quoted Rouhani during his interview with the oil minister via the Internet as saying that "there is a great opportunity for us to distance ourselves as much as possible from the sale of crude oil."

Rouhani pointed to the severe strikes and fluctuations in the global oil market and its low price, saying: "The acceleration of the ministry's plans to increase production of oil derivatives and reduce the sale of raw materials can also reduce the damage to global market fluctuations and lower oil prices."

And the United States has imposed sanctions since last November on Tehran, preventing its export of crude oil, except for exemptions for some countries.

The OPEC countries and their allies "OPEC +", reached an agreement to reduce production by about 10% to meet the decline in demand resulting from the policy of closures imposed by countries due to the spread of the Corona virus.

After the agreement, the Iranian oil minister said, last Monday, that due to the embargo, Iran, along with Libya and Venezuela, is exempt from production cuts.

[DinarThug]

The agreement to reduce oil production ... between American influence and the challenge of the global recession

 

- 53 Minutes Ago

 

 

It seems that the negative economic repercussions of the Corona disaster will continue to extend and affect the overall global economic activity, especially in the oil market, despite the importance of oil in the prevailing civilization system, being the backbone of the main sources of energy.

Some thought that the "OPEC Plus" agreement is the magic wand, which will restore a state of balance to the international oil market, and the reactions of the oil market to this agreement concluded on Sunday, April 12th, differed, as prices improved on the day following the agreement by about 4.1%, But after that, it retreated to what it was before the signing of the agreement, up to a little more than $ 30 a barrel of Brent crude.

The "OPEC Plus" group had reached an agreement to reduce its production ceiling during May and June 2020 by about 9.7 million barrels per day, representing 10% of the global production volume, and in solidarity with OPEC Plus other producers, to announce a reduction in their production ceiling by about 10 million barrels per day.

Thus, the expected total reduction is about 19.7 million barrels, equivalent to approximately 20% of the global production volume, which represents four times what was achieved from the production reduction following the global financial crisis in 2008.

The importance of reaching the OPEC Plus agreement cannot be underestimated, but it remains an important step in arranging the files of the dependent variable, not the independent variable. The stability of oil prices is undoubtedly an economically important factor at the global level, to help in making sound decisions regarding the cost of investment, the fact that Fuel is an unmistakable cost in any investment field.

It is recognized that the collapse of oil prices harms the economies of the oil sector, and the associated activities and various fields, engaged in extraction and refining activities, as well as transport and trade, and stock exchanges based on its own dealings.

But the developed and emerging countries want oil prices to remain at a level that does not lead to high inflation, and there is agreement between these countries not to return to the level of $ 100 a barrel of oil, but to remain in a circle that does not exceed $ 65.

This price rate guarantees acceptable profit margins - from the point of view of oil consumers - to oil producers and sellers, and at the same time pays an economic performance that helps to achieve growth rates that link the global economy to the desired recovery state.

But this behavior by the developed and emerging countries, or what we might consider to be the consumers ’side, confirms that the oil market has turned into a market that is controlled by consumers, and that producers have ended their role in achieving a balance of interests in this market.

America and the hand appearing
in capitalism are talking about the invisible hand that works to restore balance to the market, but the "OPEC Plus" agreement stressed the American role in managing the global economic system, especially in the oil market, so the parties (Saudi Arabia and Russia) did not sit down until after the American intervention, Nor did they reach an agreement and announce its results and abide by it only after American pressure.

The American intervention was not for the interests of the parties or the global market, as it was related to the interests of the American shale oil companies, in order to continue production, and to save millions of jobs in America, so that America accepted to reduce its share of production to compensate for Mexico’s refusal to reduce oil production, Evidence that America is reaping a bundle of interests for the OPEC Plus agreement to come to light.

Which means, that the oil price war that erupted last March was managed by America, and that Saudi Arabia fought this war by proxy, but Russia will not exit from this agreement by simply improving or stabilizing oil prices in the international market, there is an opportunity to obtain Gains from Trump and his administration in light of the problems America suffers from due to Corona.

This does not mean that the oil price war is over, but it is flammable again, whenever the interests of those who manage the oil market right now, namely America, are required.

Stagnation limits the harvesting of fruits
There is an important result reached by many experts concerned with the oil market, which is that the "OPEC Plus" agreement may help to stabilize oil prices at their low rates, but it will not succeed in raising prices, and return them to before the crisis of Corona is higher than $ 60 a barrel.

This is because the independent factor in achieving a return in prices in the oil market, to what it was before Corona, is the return of global economic activity, and out of the recession, which resulted from the almost complete disruption of air travel and travel, and the paralysis of production, due to the ban on the movement of societies , Afraid of transmitting the infection.

If the recovery of global demand returns, then undoubtedly oil prices will improve, and there are expectations that oil prices will remain on the global market at $ 30 a barrel, until the end of the first half of 2020, and if global demand improves, according to the optimistic scenario at the end of 2020, it may rise The price of oil reaches $ 45 a barrel, and the year 2021 will be the beginning of further improvement and access to pre-SK prices.

In light of international parties seeking to preserve what was reached within the framework of "OPEC Plus", countries like America and India are heading to employ the strategic inventory mechanism, to absorb part of the excess supply in the markets, where India announced its intention to add 19 million barrels to its oil reserves in May / Next May, as America announced, through negotiations with local companies, its intention to add 23 million barrels to its strategic reserves.

An independent foresight of the agreement 
It can be said that several things were taken into account in relation to the "OPEC Plus" agreement, including that the agreement will enter into force next May, which enables producers to fulfill their obligations they entered into in the context of the price war during the remainder of April / April.

The other issue is that the agreement is valid for a period of two months, which means taking into account Corona's developments. If a solution to this crisis is reached, the problem of stagnation will ease in the global economy, and thus production ceilings will be reconsidered.

In the event that a solution is not reached and the recession remains in control of the atmosphere of the global economy, the agreement extends for other periods, similar to what happened within OPEC in the agreement to reduce production ceiling since the end of 2016, which entered into force in 2017, and was renewed for various periods until mid-March last .

The agreement is an appropriate way out for both sides of the price war crisis. Russia, which suffers from a significant portion of indirect investments since the beginning of 2020 due to Corona, cannot exit for a long time with the collapse of oil prices.

Likewise, Saudi Arabia, which is heavily indebted to foreign indebtedness, recently announced Aramco’s intention to negotiate with a bank group for a $ 10 billion loan in order to fulfill its stake in the acquisition of SABIC, as well as the negative effects on the Saudi economy due to the Corona crisis.

Source: Al-Jazeera

LINK