Oil and its difficult balance at 100 dollars per barrel

Oil and its difficult balance at 100 dollars per barrel

Oil futures weaken again. In reality, despite the weekly balance that it shows, the movements in narrow ranges are the trend of the last hours due to several factors. On the one hand, the macro, which does not accompany the global manufacturing figures that are moving downwards. On the other hand, the OPEC+ meeting that is being held today and the constant gaze at unrelenting inflation and ever-higher interest rates that reduce expectations of greater fuel consumption.

The word recession continues to hover over the global crude oil market and prices do not finish setting a course, which are already 40% below the highs of last March. But let’s remember that they climb 420% from the lows recorded in April 2020. A roller coaster of difficult transition for the market.

In its price chart we see that Brent oil barely gains 0.35% in the week, with a monthly cut of 11.8% , annual advances of 28.77% and interannual advances that exceed 37% for the reference barrel in Europe.

Pending as we say of the star event of the week, that meeting in Vienna by OPEC +. From Reuters they point out that in their survey on the subject, two of the eight analysts consulted indicate that they will discuss a slight rise in production for the month of September, while the rest point out that they expect production to remain at current levels.

And all eyes are focused on whether or not the trip of Joe Biden, the president of the United States to Saudi Arabia last month, to encourage more production, paid off. And it is that the levels will already be placed this month above the pandemic levels of 2020. And with the mind set on an interruption for this winter of the pumping of Russian crude oil and gas to Europe.

Saudi Arabia and the United Arab Emirates do not want to worry Russia by making Westerners happy and, furthermore, leaving them without the capacity to move in their production to reverse a possible high volatility in the market in the future.

At the moment , futures continue, in all cases from the closest ones to those of the next financial year, below 100 dollars a Brent barrel in all cases, as we can see in the image.

Current evolution of oil futures in the market
Current evolution of oil futures in the market

Waiting for events, neither has there been any more variation on the part of analysts on crude oil price forecasts. Only JPMorgan has made a strong statement, from where they consider that Brent will stabilize at the end of the year at its current levels, around 100 dollars a barrel and for the rest of the year.

But the truth is that in this case a budding recession is expected. And they consider that, although the historical evidence suggests that demand is well supported, as long as, of course, world growth, although slowed down, continues to be positive, the price of crude oil -they point out from JPMorgan- would tend to fall between 30 and 40% in all recessions.

Let us remember that an extreme fall to these levels would take the price of Brent in the international markets to about 60 dollars, somewhat above what Citi figures, the most negative firm against the price of crude oil, for the end of this year.

Samuel Edwards
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