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Showing posts from August 30, 2020

Drop in Oil Price: factors at play

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Even before the forecast by the EIA of impending drop in price at the pumps during the US Labour weekend, the price of the commodity had been in decline, not plummeting. The trend appeared, even when there was no significant increase in US crude oil inventories. On Thursday, the main crude oil benchmarks in the US and Europe were down, nearly 1.3%. Analysts believe that the following factors may have played a role in the sudden, unexpected drop: Slow refinery runs Temporary closer of refineries for maintenance The news that China struggles to get oil from offshore vessels to storage facilities Tendency to interpret China’s increased refineries as slow economic activity Strong dollar Low demand for jet fuel    

Oil price at the pump in the US plunges: crude follows

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It doesn't come as a surprise owing to the lower demand and economic  uncertainties across the globe, involving all major economies. The EIA, the US Energy Information Administration, says the price of gasoline stands at just $2.20, before the Labour Day weekend – the lowest since 2004. Reflecting the trend, the crude oil price went below $40.00 this week. There were additional factors at work too: the crude oil imports in Asia fell significantly, implying yet another supply glut – may be not as severe as what we saw during the pandemic.    

Asian Crude Oil Imports in August

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The data clearly shows that the imports were far below the estimated values for August - for obvious reasons. The analysts, however, are particularly concerned about China's muted interest in sticking to its buying spree that it used to pursue at the height of the pandemic, while cashing in on record-low prices in the global markets. The arrival of crude oil, bought on the cheap, at an increased rate had created a logistical challenge for the world's largest crude oil importer during the pandemic. Crude oil remained in tankers offshore for weeks before being distributed across vast networks of storing facilities. In addition, there are reports that show oil, destined to be in China, is still in regional hubs too, until it gets the green light to move towards Chinese ports. In India, meanwhile, there is a significant drop of oil imports during August; since it is still struggling to keep the pandemic at bay, the situation may not dramatically improve in the coming weeks.

US Crude Oil Inventories Drop - Hurricane Laura to blame

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 Usually, the drop in US crude oil inventories ia a health sign of demand going up, if other main factors support the trend. The sharp drop in crude oil stocks last week, however, is attributed to the hurricane forced to reduce the production in offshore oil facillities, according to EIA, Energy Information Administration. On Wedneday, the EIA declared that the US crude inventories dropped by 9.4 million barrels during the period in question. It cites the production loss of 1.1 million barrels during he same period. On a positive note, the loss of inventories partly played a role in making the crude oil price relatively stable.

Recovery of Crude Oil Prices: the appearance of green shoots

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    The EIA, citing the commercial flight data from Cirium, says that the demand for jet fuel has recovered faster than we all feared during the pandemic. Since the above data source accounts for more than 73% of US commercial flights, according to the EIA, it is a pretty reliable indicator about the faster recovery. The air-line industry, especially in the US, has been there before: in the aftermath of 9/11, after the terrorist attack, there was a plunge in the number of passengers, only to recover, a few months later. In this context, as the fear of passengers subsides gratually the number of flights will pick up in proportion to the collective positive sentiments of the public. Website

Brent Crude go above $50, only in 2021 - Reuters Survey

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  According to a survey carried out by Reuters, listening to some analysts and economists, most of the people in the field think it's highly unlikely that the price of Brent crude  will go past $50. The people in the survey cite the following factors for the gloomy outlook: Contracting global demand  The fear of the second wave of Covid-10 pandemic Slow economic growth rate in the developed nations Economic contraction in India and other developing nations The precarious situations that the airlines are in Uncertainty over the success of a vaccine against the pandemic The following factors, however, according to the same survey, could slightly lift the veil of gloom in the current, fast-evolving circumstances. Anticipated OPEC cuts Declining US oil production Crude Oil Futures

Oil Price - the US inventory count is a major factor

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 In the absence of a major international event, especially related to terrorism or stemming from a simmering political issue in the Middle East, the oil price is affected by US crude stocks. In short, the oil price is inversely proportional to this crucial factor, as the US crude stocks clearly reflect the health of industrial activities. In the past few weeks, this is how the US crude stocks changed: The way price fluctuated is shown below: To see the live data, please visit the following link: Oil Price Charts

Saudi and Chinese firms register record losses

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Despite the relatively steady oil price in the global market, the large oil firms in China and Saudi Arabia have recorded massive losses. During the pandemic, China saw an opportunity when the oil prices fell to record low levels; once it even turned negative, leaving economists in an enviable academic lurch, failing to come to terms with something that had never happened before. Cashing in on the situation, China bought crude oil on the cheap and stored it in their vast network of storing facillities. Saudi Arabia, meanwhile, sold massive stock to China, as there was none to buy due to near-zero demand at the peak of Covid-19 . Judging by the press reports, the firms in both countries seemed to have made a miscalculation - the scenario of the economies coming back to normal in a matter of weeks. That means the demand did not pick up as they anticipated and massive stock remain in storage facillities - much longer than they should. As a result, the Chinese firms to struggle to sell the
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 Crude oil price Seesaws, but non-renewable fuels are here to stay In the latest report from the International Energy Agency, IEA, it clearly shows how we will still be dependent on fossil fuels despite the significant progress made in the renewable energy sector. In shows, in the next few decades, we will still be using fossil fuels despite the threat it posed to the enviroment on many fronts. The IEA explains its position with plenty of data: IEA (2020), Key World Energy Statistics 2020, IEA, Paris https://www.iea.org/reports/key-world-energy-statistics-2020 That means oil will be bought and sold in the markets without showing any sign of abating, once the Covid-19 pandmeic susides.

Crude Oil: latest news