Oil markets have entered a new phase as a result of many factors that contributed to the return of optimism to the market after a long absence; Because of the collapse in oil prices to record levels since 12 years in the month of January of this year.
It ‘s flexibility stage that is attributed to the optimism in dealing with the oil market issues, and it comes after a period of stalemate that the world has experienced for a year and half of tension and anticipation because of the awful collapse which hit the world oil markets because of the large supply and thus the decline of demand for oil.
As a matter of fact the market has been affected by the increase of the global supply and a slowdown in the pace of economic growth, but the prospect of declining of production volumes provided some support to the prices of crude.
Brent crude prices have registered arise in recent days that the prices of oil have increased up at $ 27 a barrel to settle at $ 40.40 a barrel, while contracts for US crude prices reached to $ 38.31 a barrel , down 0.5%.
The current period has come as a result of many of the indicators that contributed to spread the spirit of optimism that oil prices have exceeded the worst, but experts on the other hand still warn at the same time that a slowdown in the economy and increased production may prevent significant increases in prices.
To adopt the Doha oil agreement between the four producers (Saudi Arabia, Russia, Venezuela, Qatar) last month to freeze oil production at the Jan. levels 2016, on condition of joining other producers of oil countries from inside and outside OPEC to the agreement .
Recently , Morgan Stanley announced that it was likely that oil prices have exceeded the worst, but it has warned that a slowing economy and increased production may prevent significant increases in prices .
It is worth to be noted that the previous analysis is consistent with the status quo while we see that the prices may slightly stepped up to touch the ceiling of $ 40 a barrel, we see that the indicators do not point to economic growth, and experts at the international Monetary Fund warned of the possibility of exposing the global economy to an economic collapse in the event of non – cooperation of the major economies, and the correct of monetary policy, and the imbalances that tarnished the global economy, not to mention a bout saving the emerging economies from the specter of capital escape and investment.
But the real problem , which is still an obstacle in the face of any real oil deal is the pursuit of some countries to raise the volume of production which is what we see in both Iraq and Iran, as Tehran insists not to restrict the output until reaching its production ceiling that preceded the declaration of international sanctions on it, so we may witness in the coming period claims of OPEC countries in the event of cooperation to demand from Tehran and Baghdad , not to increase the volume of the oil supply with an estimated total increase from both of 800 thousand barrels per day, and here we will be in front of a big glut in the market, thus blocking any recovery in oil prices.
on the other hand , we see that the shale oil , fierce competitor , back again strongly to markets noting that the oil report released by UAE Crescent petroleum company , non-government company , has reported that the US shale oil returned to the fore again with the occurrence of significant changes, and the minimum that allows to be produced is the price of $ 70 a barrel, while the talk currently become of $ 40 a barrel.
According to the report, that the new changes in shale oil production involving strong indicators portend for the higher level of competition between producers, particularly the production efficiency to enter more advanced technologies, will pour to the benefit of the adjust of the cost to below $ 40 a barrel.
so , as we noted previously that oil markets are in a state of move but apparently under great pressure by the global market indices, and not cooperation of some producers in freezing oil production, not to mention the fierce rival (shale oil), which appears again as prices rose, and we do not ignore the economic slowdown led by the giant global economy (China) as well as to European markets data and the possibility of Britain ‘s withdrawal from the European Union which is catastrophic for it .
Finally, it must be noted that there is a slight improvement in the oil markets, but it is still not enough, but on the other hand, the oil market is still vulnerable to new imbalances in the absence of producers cooperation in a real way inside OPEC and outside, but it may be a call to freeze production is a good introduction to the rebalancing and fair price for oil.
Rawabet Center for Research and Strategic Studies