PakStox Outlook

Oil prices were under pressure this week. Brent crude oil futures fell 1.9% to $73 per barrel on Friday, registering the biggest weekly loss since early September, with prices dropping over 7%. The decline was attributed to weaker demand forecasts from OPEC and the International Energy Agency (IEA), slowing economic growth in China, and signs of easing geopolitical tensions in the Middle East. Both OPEC and the IEA revised down their demand forecasts for 2024 and 2025. China's refinery output declined for the sixth consecutive month, impacted by weak fuel demand and the growing adoption of electric vehicles (EVs). Meanwhile, U.S. crude oil production reached a new record last week. Although a drawdown in U.S. crude inventories and stronger-than-expected retail sales in September provided some support to oil prices, easing concerns about a broader conflict in the Middle East exerted additional downward pressure on the market.

'No changes to production policy and maintaining the plan to start raising output in December.', the OPEC+ decided in its joint ministerial monitoring committee meeting (JMMC) held on Wednesday, with the ministers refraining from making any changes to production policy, maintaining the plan to start raising output in December.  "The JMMC emphasized the critical importance of achieving full conformity and compensation. It will continue to monitor adherence to the production adjustments agreed upon at the 37th OPEC and non-OPEC Ministerial Meeting (ONOMM) held on 2 June 2024. The Committee will also continue to monitor the additional voluntary production adjustments announced by some participating OPEC and nonOPEC countries as agreed upon in the 52nd JMMC held on 1 February 2024. Furthermore, the Committee will continuously assess market conditions."

Oil prices have not reacted strongly upwards as Iran launched around 400 ballistic missiles towards Israel on the eve of its imminent ground attack on Lebanon. In recent months oil speculators have remained relatively sanguine despite the increasing Middle East war, with oil prices having fallen more than 10% in the past three months. The declining oil prices have impacted inflation. Inflation has cooled across advanced economies in recent months, paving the way for interest rate cuts by policymakers at the world’s top central banks. The Iran attack could change the equation though; Iran, a major oil producer, supplies approximately 3% of the world's daily oil output (3 million barrels) despite Western sanctions. Its influence over the Strait of Hormuz, a vital chokepoint for oil and gas tankers, is significant. Iran also exerts control over the Red Sea through its support of Houthi rebels in Yemen, who have targeted shipping. Other major oil and gas exporters, including Saudi Arab...

The oil price rally has reversed after reports that Saudi Arabia, OPEC's biggest producer, is looking to accelerate the unwinding of its oil production cuts. The Brent forward curve has fluctuated in September, going from backwardation to flat and then back to backwardation. The oil futures markets remain bearish, with more money managers holding short positions than long positions in Brent futures. Saudi Arabia is ready to abandon its unofficial price target of $100 a barrel and increase output, signaling its resignation to lower oil prices. The kingdom is now committed to bringing back its production as planned on December 1, regardless of market conditions or oil prices.  1st October 2024 read 

WTI crude oil futures dipped 0.4% to close at $70.9 per barrel, snapping a two-day winning streak despite the Federal Reserve's first interest rate cut since 2020. While the Fed's larger-than-expected 50 basis point rate cut initially bolstered prices, overall market reactions remained muted. Persistent concerns about demand, particularly from China, linger following weak economic data that heightened fears of a sluggish recovery. Additionally, traders are closely monitoring escalating geopolitical tensions in the Middle East and the risk of potential supply disruptions. Meanwhile, EIA data showed a sharper-than-expected drop in US crude inventories, down by 1.63 million barrels to 417.5 million, well above the projected 500,000-barrel draw.

Brent crude oil futures dropped over 3.4% to below $70 per barrel on Tuesday, approaching their lowest level since November 2021. This helps in bringing inflation down and strengthens policy rate cuts expectations in the next MPC meeting of the State Bank of Pakistan, OPEC has once again lowered its global oil demand outlook, marking the second such revision in just two months. The organization now anticipates a daily demand increase of 2 million barrels in 2024, a decrease of 80,000 barrels from its prior estimate. For the year 2025, OPEC has reduced its forecast to 1.7 million barrels, 40,000 barrels lower than previous projections. This downward adjustment is largely attributed to weaker oil consumption in China, particularly as the surge in electric vehicle sales dampens demand for traditional fuels. Moreover, the possibility of OPEC+ increasing production in December further exacerbates the situation, with analysts suggesting a potential oil surplus in 2025.

Brent below $75 - down 4% A recent release of economic data from China has intensified fears that the country's economic growth, particularly in the context of its substantial oil consumption, may not rebound in 2024. This concern is further fueled by the significant decline in key indicators of domestic factory demand in August, which surpassed initial projections. The price of Brent crude oil has fallen significantly in recent days. This decline was triggered by a news report suggesting that the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) might increase oil production due to a disruption in Libyan oil production. However, the price drop accelerated when news emerged that the Libyan oil disruption was nearing resolution. This means that the initial concern about a potential oil supply shortage, which had led to higher prices, was now alleviated.

Oil registered its second monthly drop this year, with Goldman Sachs and Morgan Stanley lowering price forecasts due to weak demand from China, which is the world's largest importer. Brent crude futures fell by 1.4% to settle at $78.8 per barrel on Friday on the back of likelihood of a rise in OPEC+ supply starting in October. OPEC+ is expected to move forward with a planned oil output hike despite recent Libyan outages and production cuts by some members to offset overproduction. In addition hopes for a significant US interest rate cut next month have been dashed after strong consumer spending data, this has also impacted Oil price downward.

Brent crude oil futures set to close the week at approximately $77.3 per barrel on Friday, facing downward pressure due to persistent worries about demand in major oil-consuming regions.

WTI crude oil futures climbed above $75 per barrel, extending their upward momentum following an EIA report that revealed a bigger-than-expected decline in US crude oil inventories. Crude stocks dropped for the sixth consecutive week, falling by 3.728 million barrels, significantly more than the anticipated 0.4 million barrel decrease.

Brent crude prices plummeted to their lowest point since early June, settling around $78.8 a barrel. The decline was fueled by growing fears over oil demand in China, the world's largest oil consumer.

Brent crude futures fell 2.9% to settle at $82.63 on Friday, and marked the second consecutive weekly loss, down 2.8%. A stronger dollar and concerns about China's economic outlook applied downward pressure on prices, countering the effects of tighter supply. The dollar's value increased after unexpectedly strong U.S. labor market and manufacturing data earlier in the week, reducing demand for dollar-denominated oil from buyers using other currencies. Additionally, recent data indicated that China's economy grew by a slower-than-expected 4.7% in Q2, intensifying worries about oil demand from the world's largest importer.

This week, oil could have ended with a gain after dropping for several weeks since early April when Brent peaked above $91.      On Friday, Brent initially rose above $84 on declining US inventory, climbing more than a dollar over the previous week. However, oil prices fell from the week's high as comments from U.S. central bank officials indicated a likelihood of higher interest rates for a longer period.  For the week, Brent crude futures settled at $82.79 a barrel, marking a 0.2% loss, while WTI recorded a 0.2% rise.      Looking ahead, oil will navigate between expectations of a robust US driving season, Chinese demand, and geopolitical factors in the coming week. Next week, U.S. inflation data could influence Fed decisions on rates. In other development, at the start of the week, Saudi Arabia raised the price of its oil to customers in Asia, including China, ahead of an OPEC+ meeting on production targets next month. This marked the third consecut...

 "............ the price of oil increased from around $3/b in the early 1970s to more than $40/b in the early 1980s.  It decreased to a single digit in the mid-1980s only to increase to more than $40/b again after the Iraqi invasion of Kuwait.  Prices declined to a single digit again in early 1999, only to exceed $55/b in June 2005."  Read on: The Optimal Price of OPEC’s Oil-  A F Alhajji

Oil surged after OPEC+ announced a production cut, with WTI crude rising above $81 a barrel and Brent topping $86. Inflation from energy alone is currently at 13.7% in the Euro area.  OPEC  is producing nearly 5 million barrels less per day than just a few years ago.  twt . China oil imports hit 11.1 MMBOPD last month, their all time high. Global oil demand is off to a good start in 2023, especially as international jet travel continues to accelerate.

OPEC cutting production voluntarily. Saudi Arabia will cut production by 500,000 barrels a day from May to December in coordination with some other OPEC and non-OPEC countries. Unclear if the total number is 900k or 1.4mm. Reminder OPEC+ has been underproducing. twt . Saudi 500K Russia 500K Iraq 211K UAE 144K Kuwait 128K Kazakhstan 78K Algeria 48K Oman 40K  Some say that Saudia was irritated last week that the Biden administration publicly ruled out new crude purchases to replenish a strategic stockpile that had been drained last year as the White House battled to tame inflation. “For the purpose of taking precautionary measures to confront the challenges facing global oil markets, and in order to achieve the balance between demand and supply and market stability, the ministry of oil decided to reduce the voluntary production by 211,000 b/d,” Iraq said according to an Arabic press statement released by the ministry of oil. See Source.

  📰  Oil (Brent) surges above $118 See live chart Sanctions on Russia taking toll of the World Economy in terms of fears of supply disruptions. IEA members US and Japan have committed to release 60mn barrels of Crude from Emergency Reserves.