The sentiment of the oil market has gone from bearish to bullish in recent days, while the favorable winds for the raw material were strengthening. A series of updates from OPEC and Venezuela, as well as some oil price forecasts have allowed Brent to reach its highest level since the beginning of the year, the prospects for the near future is also positive.
OPEC said in its latest monthly report on the oil market that its total production had fallen to 30.8 million bpd, or nearly 800,000 bpd, while the cartel was seeking to drive up prices. This figure, down from 31.6 million bpd in December, is mainly due to Saudi Arabia's efforts to accelerate price increases by further reducing. The Kingdom pumped 350,000 bpd less oil in January than in December, to 10.2 million bpd, which is also more than what it had agreed to cut.
Judging by the price response, Brent reaching $ 65 a barrel earlier this week for the first time in more than a month, the "anything" approach finally began to work. Russia, meanwhile, added optimism with Energy Minister Alexander Novak, stating that she would accelerate the cuts that she had agreed to make this month. and the next.
The latest oil cartel news prompted Goldman Sachs to release an update of its price expectations and, unsurprisingly, this update was rather optimistic. The investment bank said the OPEC cuts would push up prices as they were deeper than expected and combined with stronger demand that would reduce inventories. Related: How Blockchain changes the face of oil trading
Venezuela is the other factor that pushed up prices. After the United States imposed further sanctions on the Caracas government, traders appeared to be hoping for a rapid escalation and regime change that would limit the effects of Venezuela's declining production and exports on world markets. John Kemp, Reuters, in a recent column. on prices.
However, the Maduro government has proved more resilient than expected and traders are now beginning to expect a longer confrontation that could have a more lasting effect on the global oil supply, with Venezuela being one of the main global suppliers of heavy crude.
This is not a shared opinion universally, however. The International Energy Agency, for example, does not think that the removal of heavy Venezuelan crude from the markets will have a too serious effect on the price structure.
"What we do know is that the sanctions already prevent PDVSA from exporting oil," said IEA in the latest edition of its oil market report. "Despite this, the benchmark crude oil prices have hardly changed at the news of the sanctions. Indeed, in terms of the quantity of crude oil, markets may be able to adjust after the first logistical upheavals. Stocks in most markets are currently abundant and, with the implementation of the new Vienna Agreement at the beginning of the year, the available production capacities are even more numerous. "
Regardless of the slowness of the Venezuelan resolution process, past supply shocks of this kind suggest that the market response is strong at first, but subsequently weakens and prices rise. stabilize in the absence of another shock. It remains to be seen if this is what will happen now, despite cuts to OPEC. Especially since these cuts may have to be extended over a longer period than the first four months of April: oil demand forecasts are still on the downside.
By Irina Slav for Oilprice.com
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