The biggest optimists were disappointed with the return of the recovery in the oil markets, after the price of a barrel failed to rise during the past few weeks, despite a series of positive news that included a decline in stocks, and reports that confirmed the commitment of OPEC Plus countries to the agreement to reduce production.
The writer Alex Kimani says in a report published by the American oil price website, which specializes in energy news, that the state of optimism has now turned into a great fear, and the markets are facing a new wave of doubts and fears.
After a partial and temporary rise, prices witnessed a new drop to a level of around $ 40 a barrel, after the US Labor Department announced that the number of unemployment benefits reached 1.106 million last week.
This rise in jobless claims comes after one week of falling below the million mark for the first time since last March, which raises real doubts about the sustainability of the economic recovery that has been achieved.
"Given all the optimistic headlines that we have seen in recent weeks about the shortage of stocks, the inability of the barrel price to achieve any increase appears to be a matter of concern, which means that it is likely to decline," said Tariq Zahir, a managing member at TAIC Capital Consulting.
The writer mentioned that there are 3 reasons why the oil market is threatened permanently and for a longer period than was hoped:
New glut in supply
The high supply and the lack of sufficient storage space are among the most important reasons that plunged oil prices last April for the first time in a long time, and fortunately for exporters, conditions now have improved a lot compared to what they were 4 months ago, but there are signs of concern, which is that despite The decline in stocks in oil tanks in the United States during the past two weeks, the pace of this decline slowed down a lot during this period.
The data of the US Energy Information Data Administration indicates that the percentage of reservoirs in the United States witnessed a decline by 10.6 million barrels during the week that ended on July 24, then 7.4 million, then 4.5 million, and then only 1.6 million barrels. During the next three weeks.
Hence, it is clear that there is a risk that these tanks will return to fullness again, and these concerns come at a time when OPEC Plus countries have eased their commitments to reduce production, as they will increase their daily production by two million barrels, to become committed to reducing 7.7 million barrels only.
Foggy Coronavirus Mode
Most of the optimistic opinions regarding oil prices and the stock exchange during the last period were related to the hopes of reaching the production of a vaccine that eliminates the Corona virus soon, and in fact the race to produce this vaccine has now reached an advanced stage, as there are 185 research teams around the world engaged in these efforts And there are 7 vaccines so far that have reached the final stage of testing.
However, developing vaccines in a manner that respects all scientific conditions and regulations is a matter that requires a long time, in which absolute priority is given to human safety, and for this reason, many countries in the world have refrained from requesting the vaccine produced by Russia.
In light of the ambiguity over when to find a safe vaccine and its widespread marketing, the global economy and oil markets will remain vulnerable to the so-called second wave of infection with the Coronavirus.
The renewable energy boom
When investors think about renewable and alternative energy options, they usually think about this in terms of how low prices contribute to disrupting the energy transition, and although this is true in principle, there has been no evidence to date that the price collapse has negatively affected the energy transition. Research, efforts and investments aimed at shifting towards clean energy. On the contrary, the demand for these new sources continued to increase during the epidemic period.
The writer pointed out that there is a clear decline in investments in the oil and gas sector, which is an indication that managers and investors are beginning to believe that oil prices will remain permanently low, which is what the CEO of Shell expected 3 years ago.
However, this in itself may be considered by others as a positive indicator that predicts a future rise in prices, given that the decline in investments in the fossil fuel sector will ultimately lead to a decline in production, which will create a shortage of supply, and thus an increase in the price.
It is noteworthy that the futures contract for Brent crude for delivery next October, which expires on Friday, rose slightly by 0.3% to settle at $ 45.77 a barrel in early trading today, Thursday, while the US West Texas Intermediate crude futures contract settled at $ 43.40. Barrel.
The risk emanating from Hurricane Laura has pushed the market higher this week, but it is not expected to affect supplies much due to the fact that stocks of oil and petroleum products remain high due to the damage caused by the Coronavirus pandemic to fuel demand.
Analysts say a surplus in global supplies is putting pressure on any sentiment that tends to rise in prices, according to Reuters.