What supports oil prices and what trend will win
In the first decade of the month, as well as at the end of June, the price of Brent oil varied in the range of 75-78 $/bbl. This was due to:
- High demand for oil in the world owing to the strong growth of the world economy;
- Reduction of commercial oil stocks in the countries of the Organization for Economic Cooperation and Development at 27 million barrels relative to the average stock level over the past 5 years (as a result of “OPEC+” actions);
- The significant decline in US oil reserves in the United States as a consequence of the volatile proposals of oil from Canada;
- The sanctions imposed by the United States against Iran, which have reduced the export of oil. The US is pushing the EU, Japan, and India, to refuse to buy Iranian oil until November 04, 2018, in exchange for not coming under the US sanctions. In turn, the Iranian president, while defending the interests of his country, made a warning statement: “In the event of an attempt to abandon the purchase of Iranian oil and its replacement on the world market by other producing countries, it is ready to block the Strait of Hormuz, through which the world market gets about 20% of the total supply of oil to the world market “;
- Reduction of oil production in Venezuela (due to the internal crisis in the country);
- In the ports of Libya there are tankers with oil, which the United States and the EU refuse to buy from the illegitimate power of the country;
- The trade unions strike of the Royal Dutch Shell oil and gas industry in Norway and the cessation of oil production in the Knarr field in the North Sea.
Additional support for oil prices in the global market is likely to lead to a full-scale trade war between the United States and China. It seems that the restrictive duty, which was put into effect on 06.07.18, for Chinese goods was not enough. In the US, they said they are preparing to introduce an additional 10% duty on Chinese goods with an import volume of $ 200 billion. Thus, almost 45% of all imports from China will be subject to increased import duties. In turn, China made a statement regarding the introduction of appropriate reciprocal measures for its part. It should be noted, that this trade confrontation between the two superpowers could have an impact on other countries as well as impact the situation on the world oil market as China is the largest oil importer in the world.
Source: Press Service of State Enterprise “DZI”