This morning, prices in the markets for crude oil began to adjust downward. Last week's soaring take-off seems to have come to an end, due to mixed news.
Last week, the price of black gold rose well amid positive news from OPEC. As it became known, the situation with the insufficient reduction in oil production in some countries that have signed the agreement has begun to change for the better. Thus, Kazakhstan and Iraq entered into negotiations with the organization and presented their own plans to eliminate the excess production that they had after signing the contract with OPEC. Moreover, other states that are also not fulfilling their obligations will have to submit to the organization exactly the same plans to achieve the objectives of the treaty by June 22nd. If this does not happen, strict sanctions will be imposed.
Market participants were extremely encouraged that, as a percentage, the deal to reduce raw material production was already at a fairly high level, but now it will generally strive for 100%, which cannot but cause additional joy for investors.
In addition, the oil market reacted positively to news of the achievement of some agreements between the EU countries. The latter is trying to open a fund to restore the economy of the region, the amount of the tranche in which should be at least 750 billion euros, which corresponds to 840 billion dollars. The negotiation process seems to have moved forward. States are ready for the final stage of negotiations, which is also a factor in supporting oil. The creation of the fund in itself will be a good lever to maintain the economies of European countries affected by coronavirus infection. However, this will have an even greater impact on the growth in demand for crude oil, which is extremely important today, since there are still too many offers on the black gold market.
Another tense situation for crude oil also no longer exerts such serious pressure. The conflict between the United States of America and China has ceased to flare up, the tension have subsided, although it is not completely ruled out. Nevertheless, market participants had the hope that relations between the countries, if not immediately and not in the near future, could be improved.
The fact that China announced its intention to purchase agricultural products from the United States of America, which will take place as part of the first step in implementing the trade agreement signed earlier by the US, is in favor of mitigating the conflict.
However, the rise in the oil market is limited by several factors. First, market participants continue to closely monitor the increase in the number of patients with coronavirus in China and the United States. New outbreaks hint to investors about the possibility of a second wave of the COVID-19 pandemic in the world.
In Beijing, traffic was reduced due to quarantine measures. In addition, they again had to resort to extreme measures and close stores and other retail outlets that had just begun their activities after the first quarantine. Of course, this will be the next and perhaps, even bigger blow to the Beijing economy, which has not fully recovered after the first wave of the crisis.
A record number of cases is also again recorded in some states of America, so maybe strict quarantine measures will again be implemented.
The situation with coronavirus does not allow the cost of crude oil to rush up without looking back. Prices, therefore, continue to remain in a rather narrow corridor and remains unbroken. Most analysts believe that this will not be broken in the near future.
However, there are some positive aspects of the oil market. Thus, the number of operating oil and gas drilling rigs in the United States of America has again declined. This time, another thirteen stations suspended their activity, and the total number of employees turned out to be at the level of 266 units. This is a record low, since a year earlier the number of drilling units was 967 units. The number of oil installations also decreased by 10 and reached 189 units, which is also an extremely low indicator in the entire history.
This morning, the price of futures for Brent crude oil for delivery in August at a trading floor in London fell by 0.33% or 0.14 dollars, which sent it to the mark of 41.05 dollars per barrel. Recall that Friday's trading ended with a steady increase of 1.6% or 0.68 dollars.
The price of WTI light oil futures for July delivery in electronic trading in New York also fell today. In the morning, the decline was 0.68% or 0.27 dollars, and the current level was at around 39.48 dollars per barrel. On the last trading day last week, the price of raw materials rose immediately by 2.3% or 0.91 dollars. This has become its maximum value in the last three months or more.
In general, the dynamics of the cost of crude oil last week was more than good. So, the Brent brand increased by 8.9%, and WTI went even further and added 9.6%. But the new week can be extremely mixed for prices in the oil market.
