“Kamco Invest”: maintained its rise despite the increase in volatility
Oil prices rose to a 7-week high yesterday, supported by continued pressure from the European Union to ban Russian crude imports, which would reduce supply, and with investors focused on increasing demand after easing Chinese closures imposed to combat “Corona”.
And EU foreign ministers failed in their efforts to pressure Hungary to change its position on the proposal to impose an oil embargo on Russia in the wake of its invasion of Ukraine. Passage of this proposal requires the approval of all EU member states.
But diplomats are now pointing to the May 30-31 summit as when a gradual Russian oil embargo will be agreed.
Brent crude futures rose to $ 115.50 a barrel, the highest level since March 28, rose 1.16 percent, or one percent, to $ 115.40 a barrel.
US West Texas Intermediate crude futures rose 78 cents, or 0.7 percent, to $114.98 a barrel.
The two benchmarks rose more than two percent yesterday, following a 4 percent jump on Friday.
Analysts said that crude was supported by hopes of a recovery in demand in China, which is looking to ease restrictions to combat Covid-19.
Oil prices maintained their highs, and remained above the $100 per barrel barrier in May 2022, despite the sharp increase in volatility.
According to a report issued by Kamco Invest, the uncertainty about the sanctions imposed by the European Union on Russia, in light of the escalation of some disputes, contributed to offsetting concerns related to demand, as China continued its strict closures, due to the high cases of Covid 19 virus. Moreover, the conflict between Russia and Ukraine affected economic growth in the European Union region, which led the International Monetary Fund to reduce the region’s GDP growth forecast by 110 basis points to reach 2.8 percent in 2022, compared to 5.3 percent in 2021. The pace of tightening monetary policies in the United States will have a negative impact on the prospects for the growth of the American economy, which may lead to a relatively slower pace of economic growth than was previously expected.
The strict closures in China, as evidenced by the lack of car sales in Shanghai during April 2022, led to a sharp decline in oil imports nationwide in April 2022, and also affected economic activity in general, as industrial output and consumer spending fell to their lowest levels since The beginning of the pandemic outbreak, with no signs of recovery in sight, according to Bloomberg, while GDP declined by 0.7 percent year-on-year in April 2022. On the other hand, this situation also affected the global supply chain with the face of a group Expanded companies from car manufacturers to consumer goods companies to escalate costs at an unprecedented pace, in addition to production obstacles.
At the same time, the voluntary sanctions imposed by many countries around the world on Russian oil tightened the oil market at a faster pace than expected, and despite the lack of consensus of the European Union countries, and the resulting delay in imposing full sanctions on Russia, Germany It plans to stop importing Russian oil by the end of the year. As a result, “OPEC” in its monthly report reduced the expected supplies coming from Russia by 0.36 million barrels per day to 10.88 million in 2022. On the other hand, the International Energy Agency said that Russia reduced oil production by about one million barrels per day in April 2022.
In addition, the inability of many oil producers to increase production reinforced the gains in oil prices despite the pessimistic sentiment on the demand front, and “OPEC” announced production increases at a marginal pace during the month, in light of the increase in production in Iraq and Saudi Arabia, which was offset by Partly a sharp decline in Libyan oil production, and the overall compliance rate of OPEC and its allies with production quotas reached 223 percent, according to the International Energy Agency, with the compliance rate of OPEC member states reaching 162 percent.
In the refined products market, prices remained close to record levels in many countries of the world, and US gasoline futures prices crossed the $4 per barrel barrier for the first time, reaching a new record level, while diesel prices remained high globally as a result of the decline in Russian exports. Jet fuel prices did not witness little change, as demand remained affected by the closure measures imposed by China and the conflict between Russia and Ukraine, and the rise in prices reflected the exposure of refining capacity to a number of pressures, and the Saudi Oil Minister made a similar statement indicating that the refining crisis is the catalyst for the increase in costs The fuel is not the lack of oil.
Monthly price trends
Oil prices remained above $100 per barrel in May 2022 after falling for a limited period below this level in mid-April, as concerns on the demand front were offset by supply-side constraints. However, the pace of price fluctuations began to increase since the beginning of the month, and oil futures contracts were traded in the range of 102.5 dollars per barrel and 112.4 dollars per barrel. In addition, the refining crisis contributed to raising the prices of the final product, and this was reflected in the rise in gasoline prices, which reached record levels in the United States and Kenya, while the United Kingdom accelerated the pace of price adjustments to every three months instead of six.
In India, jet fuel prices remained at an all-time high after the recent 5.3 percent increase, while gasoline and diesel prices remained high near record levels. A Bloomberg report revealed that oil refining rates in China fell to the lowest levels recorded in nearly two years as a result of closures, which led to a decline in demand in the country.
As for the United States, a report issued by Turner, Mason & Co., stated that about one million barrels per day of refining capacity, or about 5% of the total, has been closed since the beginning of the pandemic, and refining capacity has shrunk globally by 2.13 million. barrels per day, according to the report.