Monday , June 14 2021

Oil cuts its crash in full countdown to the G20 and the Opep



Opep itself acknowledged in its monthly report a "surging supply surplus" in the oil market

The week starts with a truce in oil, plummeted to 8% last Friday. The Brent comes out of minuses of more than one year and recovers at times the US $ 60, in full countdown to the summits of the G20 and the Opep.

The forcefulness of the rises registered in the price of oil during the first 10 months of the year has triggered the susceptibility of the investors of the market of the crude. The turbulence happens, and they raise their levels of volatility to unpublished levels since 2016, the year that began with crude oil sunk in $ 27.

The last few weeks have made practically normal the collapse in the price of crude oil. In just ten days, the crude has registered three days with shortcuts of up to 6%.

Last Friday, the blast grazed even 8% in the case of the West Texas barrel, a reference in the USA. His quote plunged to $ 50.4. In the barrel of Brent, the 6% downturn dragged its price below US $ 60, down to US $ 58.8, its lowest shares in more than one year and 30% below the peaks at the beginning of October .

The week starts with a truce from investors in the oil market. The comeback becomes stronger, and exceeds 2% at times. This reaction drives Brent's barrel quote to intraday highs above US $ 60. The price of the West Texas barrel, which is a benchmark in the US, recovers US $ 51.

The widespread improvement in the markets mitigates latent alerts on the degree of deceleration of the global economy, a situation that would directly impact on demand for crude oil. The European agreement on Brexit and the improvement in the perspectives on Italy at least momentarily leave the worst planned scenarios in Europe.

The G20 as a preliminary to the summit of the Opep
On a more global level, the prospects could suffer significant adjustments this weekend, on the occasion of the celebration of the G20 summit. All the focuses on this meeting are put in the meeting that will be held by the top US and China leaders. In his meeting, Donald Trump and Xi Jinping could sign peace in their tariff war. This agreement would help to frighten the fears of an economic downturn, and to a lower demand for oil.

But in the last days, the magnitude of the oil crash has raised the expectation generated by another meeting that will take place within the framework of the G20 summit in Argentina. The program includes the assistance of the top executives of the two largest oil exporters, Saudi Arabia and Russia, who will share the stage with Donald Trump, the biggest scourge of Opep in recent months with its warnings against a cut in production .

Saudi prince Mohammed bin Salman and Russian President Vladimir Putin have tried, with unequal success, to control the oil market in the last two years. The pact of Opep and other producing countries such as Russia to try to recover the balance in the oil market will be reviewed in just a week and a half.

The presence in Argentina of the two leading representatives of Saudi Arabia, the de facto leader of the Opep, and Russia, the leader of countries that are part of the Pact that do not belong to the Opep, could provide relevant news about the existing talks to advance in a imminent cutout of production.

On December 6 the summit of the Opep will study to approve a reduction of its pumping quotas to help lower the forecasts of excess supply and, by extension, to break the recent crash in the price of oil.

The leaks facing the Opep summit point to a debate that focuses on reducing crude oil production by about 1.5 million barrels per day. Opep itself recognized in its monthly report a "surplus supply surplus" in the oil market, and the International Energy Agency figures about 2 million surplus of crude for the first half of 2019.

The effectiveness of the cutout that ultimates the Opep will also depend on the flexibility in the sanctions imposed by the USA. to Iran. The blockade came into effect at the beginning of the month, but the US It decided to grant exemptions to the main buyers of Iranian crude, so the impact of these sanctions has been virtually nil to date, as opposed to the one planned for the beginning of October, when the barrel of Brent touched 2014 highs above the US $ 86.

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