L’Expression: Economy – The barrel erases its losses

The barrel gave OPEC + many scares, the day after its decision to moderately increase its production by 400,000 barrels per day, from August until September 2022.
An agreement that was sealed on July 18. Against all expectations, the market did not react favorably. Oil prices plunged on July 19 to levels not seen since late May. Throughout the session, the two references to black gold kept sinking. In post-close electronic trading, the West Texas Intermediate even dropped below $ 66 (65.86), its lowest level since the end of May.
A barrel of Brent from the North Sea, for September delivery, dropped nearly $ 5 ($ 4.97), or 6.75% from the July 16 close, to end at $ 68.62. A dip attributed in part to a revision of the base production level for four members of OPEC + as well as Russia, which should allow them to increase their production. “It could have given the impression to other countries that they lost there,” said Andy Lipow, chairman of the consultancy firm Lipow oil associates. And we could, perhaps, see an increase in production from them outside the terms of the agreement announced on Sunday (today, Editor’s note) he added. The market, which saw it as an open breach in the cohesion of OPEC +, was shaken. The resurgence of the Sars-Cov-2 pandemic has added a layer. “The Delta variant could generate new confinements, which would penalize demand and undermine the ability of oil markets to return to normal in the short term”, in terms of production, warned Andy Lipow.
However, it should be noted that the production of the organization of the oil-exporting countries and its 10 allies, including Russia, is around 5.7 million barrels, far from its pre-health crisis levels. However, oil prices would eventually recover the day after their sharp fall.
A barrel from the North Sea, for September delivery, closed July 19 at $ 69.35, up 73 cents from the previous day’s close. In New York, the barrel of WTI for August, of which it was the last day of quotation, had increased by 1 dollar, to 67.42 dollars. “Prices rebounded after the significant loss of 7%, mainly due to concerns about the Delta variant,” said the chairman of the consultancy firm Lipow oil associates.
And the OPEC + agreement? How will the market perceive it? The agreement “will ultimately result in a further reduction in oil stocks for the rest of the year, which supports prices,” notes Andy Lipow. The deal was no surprise. The monthly increase in production is modest compared to expectations of recovery (activity and demand) for the next 6 months, so we will need to tap into global stocks, which will be bullish for prices, a judged the analyst.
The prices of black gold will continue to rise again. The barrel of Brent will advance by $ 2.88 on Wednesday, then $ 1.56 on Thursday, before ending on a small rise the next day. It will close the week which ended Friday, July 23, with a gain of 31 cents, at 74.10 dollars despite a surprise increase in US stocks. A performance highlighted by the experts. “We have overcome a lot of things this week,” said John Kilduff, of the investment advisory firm Again capital, signaling the unexpected rise in US crude stocks, published on July 21, which ultimately did not disturb price increases. “This shows that the market has already taken into account this scenario of a stronger demand that is emerging,” said John Kilduff, who warned that all of this could be threatened by Covid-19. “This is what restrains us”, concluded the specialist.

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