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All week, geopolitics continued to dominate the world of crude and its dynamics. Yet, despite all the drama, oil prices could not stand out. And that's the morality of "raw" history today.
Markets, which were up at the end of last week, began to collapse earlier this week, hinting that the impact of a tropical storm on US Coastal production of the Gulf of Mexico was short-lived. China's economic data further clouded the outlook for demand. Markets also acted quickly, selling crude oil, as soon as signs showed that Washington and Tehran both seemed prepared to soften their political stance.
Oil prices fell when President Trump and US Secretary of State Mike Pompeo gave a softer tone to Iran. Markets have yielded a bit more, once Tehran has also chosen to extend an olive branch to Trump and his administration. The price pressure on the crude oil markets, however, picked up a bit on Friday, when it was said that Iran had seized a British tanker in the Strait of Hormuz. The British government has announced that a second Liberian-flagged vessel has also been taken.
The markets were also strengthened, with reports of the disappearance of the UAE tanker radar, MT Riah Emerged, who had disappeared earlier in the week, as they were crossing Iran's territorial waters. in the Strait of Hormuz. Iran's Islamic Revolutionary Guard Corps later announced that the tanker was being held at its Qeshm Island base for repair.
These two incidents sparked fears of fireworks in and around the Strait of crucial importance. Some Western diplomats have said the oil seizure could be an Iranian attempt to exert diplomatic pressure.
Some would also have felt that this could be perceived as a total reaction to the seizure of the Iran-owned tanker Grace 1 by the British Royal Marines off Gibraltar a fortnight ago.
It only strengthened markets, even temporarily. Once Iran said it had not seized the MT Riah, the pressure had dropped and the markets returned to normal. Addressing reporters in New York, Iran's Foreign Minister, Mohammad Javad Zarif, described the routine incident in the maritime police.
Despite rising temperatures following these two incidents, the markets did not collapse.
Yes, prices have gone up, at least right after. But that did not explode in the true sense of the word.
Many badysts felt that geopolitics was already taken into account in the global market equation.
But the less intense market response to the fierce struggle in the oil-rich region in and around the Strait of Irmuz was also indicative of the emerging "raw" new reality. Normally this would have been enough to set the oil markets on fire. Not this time.
The shale phenomenon has changed the fundamentals of the market.
There are also other reasons for this calm. The global economy is slowing – with heavy repercussions on the oil and energy markets. China's economic growth has slowed. Its growth rate of only 6.2% in the second quarter of 2019 was the lowest in 27 years. That was enough to shake the raw nerves.
In its recent monthly oil report, the International Energy Agency announced that world oil supply exceeded demand by about 0.9 million barrels per day (bpd) in the first six months of the year. this year.
"This surplus adds to the huge stocks accumulated in the second half of 2018," said IEA. This is a serious challenge for the stabilization efforts of OPEC.
Fatih Birol, the executive director of the IEA has insisted in recent days. Opec's monthly report also confirms that as a result of increased production of non-Opec products, the call to Opec will be significantly lower next year. The increase in shale production in the United States will exceed the additional demand this year and the following year, which means that the market could register a large surplus in 2020.
The growth in crude demand is also under the hammer. In its latest short-term energy outlook report, the US Energy Information Agency downgraded its forecast of global oil demand growth to just $ 1.1 billion a year this year, compared to 1.2 billion dollars last month.
Source: Dawn
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