Oil prices have been the biggest beneficiaries of a number of geopolitical factors that have affected oil markets over the past few weeks, leading to increased volatility in oil markets, becoming the first asset class to Record new levels of rise through 2018.
According to the report, the first batch of trade talks between the United States and China and their attempts to restrict the flow of goods and services between them through the imposition of import duties, resulting in a situation similar to the war of trade in the beginning and led to a decline in oil prices by the end of March 2018, but attempts Succeeded in defusing this conflict, which had a positive impact on oil prices.
In its monthly report, the International Energy Agency (IEA) noted the risks surrounding oil demand as a result of China’s import duties. One of the main geopolitical concerns is gold’s two-year high.
Geopolitical tensions in the Middle East have risen to new levels since the beginning of April 2018 and have led to a wave of shocks across oil markets. Prices rose to their highest level since 2014 after US intervention in the region, pushing the price of Brent crude to above $ 72 per barrel.
Markets are also looking to see whether the United States and the European Union will impose sanctions on Iran, with the stock expected to fall in May 2018, potentially disrupting oil market stocks.
In terms of OPEC oil supply, member countries cut production levels by 201,000 barrels per day (bpd), according to OPEC’s secondary sources, while Bloomberg data indicate a decline in production rates of 170,000 bpd, with an average production rate of 32.04 Million barrels per day, the lowest level since May 2017.
The decline was mainly due to a decline in the production of Venezuela, Libya, Algeria and Angola, while the increased production of both the UAE and Nigeria to mitigate the decline.
This pushed OPEC’s commitment to a cut in production to a record high of 163 percent for the fifth straight month, according to the International Energy Agency.
Moreover, the factors behind the rise in oil prices have not only been on the supply side, but also increased demand for oil, particularly from OECD member countries, according to OPEC’s monthly report.
This led to a revision of oil demand data for 2018 and raised by 30 thousand barrels per day compared to the previous month’s level with an expected growth of 1.63 million barrels per day.
On the other hand, although the International Energy Agency maintained its forecast for oil demand growth for 2018 unchanged at 1.5 million barrels per day, it also indicated a rise in demand from OECD member countries during the first quarter of 2018 due to the cold weather In the United States and the launch of a new petrochemical project.
As we have noted in our previous reports, KAMCO’s research reiterates that the current rise in oil prices is supported by many fragile factors. We believe that the main components are currently diminishing and external factors are moving the market.
Rising oil prices are also putting the production cut-off agreement against member states in their desire to benefit from higher prices rather than allowing the United States to produce relentlessly.
Oil prices averaged little change on a monthly basis in March 2018 after the surge in prices during the third week of the month was offset by a drop in prices again at the end of the month on the back of trade disputes between the United States and China. This weakness increased in early 2018, but geopolitical concerns in the Middle East, as well as signs of strong oil demand and supply shortages, all pushed oil prices higher during the second week of the month. OPEC crude averaged $ 63.8 per barrel, The price of Kuwait’s crude oil and Brent crude was $ 62.23 and $ 65.9 per barrel, respectively.
US oil inventories continued to fluctuate on a weekly basis, with recent reports suggesting stockpiles are up against analysts’ expectations. US production rose to new levels of 10.5 million barrels per day, which, in addition to increasing imports, resulted in higher oil reserves.
The US Energy Information Administration report showed inventories rose to 1.8 million barrels per day during the week ending April 6, 2018, while the International Energy Agency report indicated that the oil storage capacity had nearly doubled to 3.3 million barrels. However, Four weeks over the same period last year.