Due to fears of a global economic slowdown and the increase in cases of Coronavirus in China and the world, oil prices fell below $100 on Tuesday, reflecting a decline in risk appetite among traders.
The drop in oil prices intersects with the upcoming visit of the US president to the Middle
East, which he will start with a visit to Israel. Biden seeks to tame high energy prices that have wrecked world economies.
But the world is paying more attention to president Biden’s visit to Saudi where he will attend the Gulf Cooperation Council summit on July 15-16.
During his visit to Jeddah, where the GCC will be held with 3 other countries (Egypt, Jordan and Iraq), Biden is scheduled to meet with Saudi King Salman bin Abdulaziz, and Crown Prince Mohammed bin Salman.
National Security Adviser at the White House, Jake Sullivan, said that the US president will seek, during the meeting, to increase oil production in the “OPEC” countries, in order to reduce gasoline prices.
Sullivan said Monday that the US believes “OPEC” has room to increase production if Biden’s visit to the region results in any agreements.
French President meets Sheikh Mohamed bin Zayed
There was information that French President Emmanuel Macron will also meet with UAE President Sheikh Mohammed bin Zayed next week in Paris to discuss oil supplies.
French Finance Minister Bruno Le Maire told local media in June that the UAE was providing a temporary alternative to Russian oil and diesel.
Talk about the meeting comes after a video leaked of Macron telling Baden on the sidelines of the G7 summit that Sheikh Mohammed bin Zayed told him that Abu Dhabi was producing oil at “maximum capacity” and that Saudi Arabia could only increase production by a small additional amount.
The UAE Energy Minister, Suhail Al Mazrouei, responded, saying that the current UAE production is close to the country’s reference production ceiling in the “OPEC +” agreement, which is 3.168 million barrels per day. And he confirmed on his twitter account: “Our commitment is based on this ceiling until the end of the agreement.”
Oil price dip
Brent crude lost $7.22 to reach $99.88. West Texas Intermediate (WTI) crude also lost as much as 8 percent to fall below $96 a barrel, marking the lowest closing level since early April.
Contributing to the decline were a rise in coronavirus cases in China and anticipation of inflation data to be released in the US.
Meanwhile “Bloomberg” notes that dwindling liquidity also exacerbated price volatility, while money managers turned more pessimistic about major oil indicators last week, which led to reducing net long positions to their lowest levels since 2020.
Meanwhile, “OPEC” expected global demand for oil to rise next year, but at a slightly slower rate than it was in 2022, with consumption supported by better containment of the Corona epidemic and global economic growth, which is still strong.
In its monthly report, “OPEC” said that it expects global demand for crude to increase by 2.7 million barrels per day on an annual basis in 2023, to reach an average of 103 million barrels per day. This is while leaving growth forecasts this year unchanged at 3.4 million barrels per day.
This is the organization’s first oil market forecast for next year, which reflects lack of comfort among consumers who are experiencing pressures, with the need for more crude from “OPEC”.
“Next year, the outlook for healthy global economic growth amid improvements in geopolitical developments, along with expected improvements in the containment of Corona in China, is expected to lead to increased oil consumption,” OPEC said in the report.
It stated that its forecasts for 2023 assume that there is no escalation of the war in Ukraine, and that risks such as high inflation will not negatively affect global economic growth.
US Energy Information Administration
For its part, the US Energy Information Administration lowered its forecast for oil prices in 2022 and 2023, and also reduced its estimates of US crude production during the same period.
According to the July Short-Term Energy Outlook report issued on Tuesday, the average price of West Texas crude is expected to reach $98.79 per barrel this year (2022), down 3.6 percent from the previous month’s estimate.
In 2023, the Energy Information Administration reduced its forecast for the price of US crude by 3.7 percent, to likely record $89.75 a barrel.