The cost of crude oil continued its rise this morning. The main reason for the positive dynamics was cautious optimism about the slow but sure stabilization of the market situation, in particular about the balance of supply and demand.
The OPEC, which closely monitors the fulfillment of obligations under the oil production reduction treaty, held a meeting yesterday. During the meeting, the participants of the contract were reminded of the importance of timely execution of the transaction, since the future fate of the world oil market directly depends on it. In addition, sanctions measures were presented that will be used against countries that do not fulfill the full scope of their obligations.
At the same time, the price of Brent crude oil futures for delivery in August on a trading floor in London made a solid jump of 0.82%, or $ 0.34 this morning, which raised them to $ 41.85 per barrel. Yesterday's trading also closed for this brand in the positive zone immediately at 2%, or 0.8 dollars, and the final price was at around 41.51 dollars per barrel.
The cost of WTI crude oil futures for delivery in July on an electronic trading platform in New York is also substantially adjusted upward. In the morning, it already added 0.82%, which corresponds to 0.32 dollars. Thus, its price moved to the level of 39.16 dollars per barrel. It can be recalled that yesterday, WTI oil also made a great leap forward (2.3% or 0.88 dollars), and it began to cost 38.84 dollars per barrel by the end of trading.
The situation on the implementation of the contract to reduce oil production, ratified by OPEC, began to clear up. Countries that failed to meet contractual obligations on time proposed a way out and their plans to compensate for an unfulfilled contract. In particular, it was Iraq and Kazakhstan that came to an agreement with OPEC. The rest of the debtors are given time until June 22 to provide the organization with their options for compensation. Strict sanctions may begin after this date.
The fact that Iraq and Kazakhstan started negotiations with OPEC has already aroused a wave of enthusiasm among market participants. This has shown that states are interested in cooperation and understand the need for joint actions aimed at stabilizing the oil market.
The current state of affairs makes investors think that in the near future, the deal to reduce the level of oil production can be completed in full, that is, by 100%, and not by 87%, as it was before. It should be noted that according to the data, more than 1.26 million barrels of crude per day were released to the market over the last month of spring. In general, OPEC member countries were able to cope with their obligations by 84%, and the excess of the permissible production level at them amounted to 0.97 million barrels per day. The countries that are not members of the organization did better: they completed the deal by 92%, and the surplus was in the region of 0.29 million barrels per day. Such news pleased the raw materials' market, and the price of it received support for further growth.
At the end of the meeting, it was noted that the deal to reduce the production of raw materials can be extended for the next period only if all the agreements this time are 100% fulfilled. If there are problems with the performance of obligations again, the contract may cease to exist, which in itself will already be a blow to the black gold market.
The ongoing lifting of quarantine measures related to the coronavirus pandemic is also supporting the cost of oil. However, the increase in the number of cases in the United States and China causes some tension among market participants. The new wave of COVID-19 can seriously undermine the ongoing recovery. Moreover, the next crisis will become deeper and more difficult to overcome.
Meanwhile, the fact that crude oil completes the week with consolidation above the strategic mark of $ 40 per barrel is already encouraging for investors. This will most likely be the starting point for moving to the next level of $ 45 per barrel. In this regard, investors are focusing on how quickly oil reaches a new peak.
