Oil prices are conquering a height of $50 per barrel.
The glut is still in power, however, yesterday the Energy Information Administration reported 2.5 million barrel drop in the American inventories. The news about less oil in the stockpiles always pushes the price higher. In combination with the weak dollar positive dynamic of the oil market is natural. Meanwhile a buzz about freeze from Saudi Arabia becomes louder, demand for energy resources grows up and the forthcoming International Energy Forum will take place in five weeks in Algeria.
This month the oil price has gained 19 % from the lowest point $39.66 on August 2 to the six weeks record $47.58 per barrel WTI. Brent achieves $50 per barrel for the first time since June 20.
In June traders were naïve and optimistic, believing in $60 per barrel in August. The summer appears to be hot and eventful. The Brexit detonated the financial world, worries and uncertainty enveloped the markets. Terror attacks turned out a routine in Europe. The Fed puts the USD under the pressure, intriguing with the rate hike. Moscow cooperates with Tehran against the Syrian opposition, using Iranian military bases for Russian air forces. The world will never be the same, the politicians remind us. The oil prices mirror our confidence in the peaceful and stable future. Who foresees the tranquility and flourishing? Nobody. Thus we stuck below $50 per barrel because OPEC does not want new exporters at the markets with the same level of demand for the oil.
Anyway, Riyadh estimates average daily consumption of refined products as 228,000 barrels in the first half of the year, while gasoline demand contracted for the first time in a decade. Saudis rethink a freeze of the crude oil output for the second time this year. In April they shifted the blame to the Iranians for the failure of negotiations. These days Riyadh has already talked about a new negotiation stage at the International Energy Forum at September 26-28. A pre-World Cup 2022 spending spree stimulates demand in Qatar. Will it be enough to inspire the production in the Gulf? Not at all! Saudi Arabia, UAE, Oman, and Bahrain are forced to limit government spending, including reducing of fuel subsidies because of low oil prices. Probably, in September at the Forum a decision regarding a freeze of output will be achieved.
Iranians and Russians, as well as some OPEC members, like Venezuela, are still dreaming about $100 per barrel. Unfortunately for them, analysts forecast $50 per barrel for next four months.
But the most unpredictable consequence of the low oil prices and budget problems in Riyadh is gossip about official and even diplomatic contacts between Saudi Arabia and Israel. Looks like in Riyadh they have got started a campaign for deepening and warming the relations between the countries.