This morning, the cost of crude oil began to slightly correct upwards after a significant decline the day before. It can be recalled that yesterday's trading session ended negatively for black gold, which was caused by the disagreement of the UAE, Kuwait and Saudi Arabia to continue a voluntary reduction in production on its territory.
Yesterday, the Saudi authorities issued a statement in which they made it clear that they did not intend to further limit their oil production, as was the case in previous months. It can be noted that the country, in addition to the agreement with OPEC members, independently came to the conclusion of a voluntary additional reduction in production by another 1.2 million barrels per day. Analysts had expected this voluntary step to last: at least there was news that the excess decline would continue at 1 million barrels per day in the summer. However, after the last meeting of OPEC member countries, Saudi Arabia decided to abandon its intentions and not reduce oil production in addition to the main contract. Of course, the market participants were disappointed, although this decision was quite justified and expected for background and so disputes arose between members of the organization and the failure of some parties with the obligations under the contract in full.
The mood of investors has also changed after the news that the Libyan national oil corporation is going to return to the raw materials market. This was announced last night, which immediately affected the cost of crude oil. So far, no balance has been found between supply and demand, and Libya's move can only worsen the recovery that has just begun.
Meanwhile, the Libyan company plans to reach full capacity in about three months of operation. It can be recalled that oil production in the fields in Libya will begin after a six-month downtime. At the beginning of this year, the Libyan National Army blocked all objects of the oil industry, which led to their complete halt. To date, five production points have already been launched again, which are capable of producing raw materials with a total volume of 20 thousand barrels per day. However, the Libyan company plans to increase this figure in the coming days to 55 thousand barrels per day. Moreover, the first stage of production recovery involves an increase in volumes to 135,000 barrels per day, which will be about half of the full production capacity of the Libyan wells.
The restoration of oil production in Libya, of course, disappointed market participants who were hoping for a positive wave to rise to the level of $ 45 per barrel. The news on shale oil production in the United States of America adds even more tension. The level of its production exerts significant pressure on the recovering markets, which are beginning to experience difficulties in further growth. In this case, investors try to save their capital and take profits at around $ 40 per barrel of WTI crude oil.
Today's morning growth was very limited by the prospects for an oversupply of crude oil in the market, which could happen in the near future, which would cause contract prices to a serious decline. On the other hand, the confident removal of restrictive measures related to the coronavirus pandemic continues, which, on the contrary, can be a decisive factor for increasing the demand for raw materials. However, all this is still in theory, and in practice, market participants play back the unfavorable news about the increase in production, which make the price of oil fall, although most analysts are sure that the decline will not be serious and long, since black gold has already managed to gain a firm foothold above 40 dollars per barrel.
Many traders are now saying that there is an extremely favorable moment for WTI crude oil, when it can follow Brent oil to rise above the $ 40 per barrel mark. At least, as long as Brent holds above this value, WTI has every chance of doing so.
This morning, the cost of futures contracts for Brent crude oil for delivery in August on a trading floor in London was at $ 40.83 per barrel, indicating a slight increase of about 0.07%, or 0.03 dollars. It can be recalled that yesterday's trading session closed with a price decline by 3.6%, or 1.5 dollars.
Futures contracts for WTI crude oil for delivery in July on an electronic trading floor in New York increased their value in the morning by 0.31%, or 0.12 dollars, which sent them to the level of 38.31 dollars per barrel. Monday's trading for light oil ended in a price decline by 3.4%, or 1.36 dollars.
According to many analysts, yesterday's negativity on the market is not able to last long, and such swings only indicates that the oil market is in the process of active recovery.
