The breath is steady, the heartbeat is regular, the pulse is normal, the state is stable: this is namely what can be said today to characterize the state of the oil and gas industry after the prolonged period of turbulence and the extremely low break-even level since July 2015. In May, Brent surpassed the mark of $74, and WTI - $69 per barrel. Both figures are the highest since November-December 2014 as testified by the Bloomberg’s data. Within one day June Brent futures added 1.3% to reach $75.02. One WTI barrel also went up in price to $68.95. At that China accounts for about a quarter of an increase in global oil demand. In the last three years consumption in the country has been growing on average by 5% per year vs. the world average rate at 1.7%. According to the forecast of the International Energy Agency (IEA), China and India are expected to be the main drivers of oil demand at least until the mid-2030s. Last year China became the world’s largest oil importer, leaving the United States behind: with the consumption at 610 million tonnes, the PRC imported 420 million tonnes of oil. China bought about 8.43 million barrels of oil daily against the backdrop of the high demand and the continuing formation of a strategic reserve.
Apparently these factors were not the main factors driving the today’s price trend, runs the MOMR for May of the International Energy Agency (IEA). The situation around the anti-Iran sanctions and the decreased oil output in Venezuela could cause a deficit in the oil market. The IEA announced its intention to monitor the development of the situation, and, if necessary, to act in order to stabilize the market. In particular, the agency can use the oil reserve available in case of force majeure. The second factor - the output cutback agreement was reached in late 2016 by the OPEC and non-OPEC countries – keeps the exporters from ramping up the output. Under the cutback deal, the parties to the agreement should reduce production in total by 1.8 million barrels and this agreement is valid until the end of 2018.
The recent give-and-take between the leaders of the world’s two largest trade partners USA and the EU has sparked the greatest interest of the market.
Nowadays the European Union shows its readiness to apply, if necessary, the so-called blocking law to protect its companies from the anti-Iranian sanctions of the United States when the US withdraws from the Joint Comprehensive Plan of Action (JCPOA) on the Iran’s nuclear program, European Commissioner for Home Affairs Dimitris Avramopoulos said. The media has already reported that Brussels is considering the possibility of switching from dollar to euro in payments for Iranian oil supplies. “Looking at the latest decisions of Donald Trump, someone could even think: With friends like that, who needs enemies? But frankly speaking, Europe should be grateful (to President Trump – editorial note). Because thanks to him we have got rid of all illusions”, Tusk wrote on Twitter.
Nothing was said about what kind of illusions the EU had got rid of and whether the US will continue to support the EU’s energy diversification policy, since the EU is now actively forming new oil and gas hubs in Egypt, Turkey, Greece and Morocco.
“For the US Administration European energy security is a priority, and this shipment (the first LNG shipment to the European market) shows our support for the European Union’s goal to diversify energy supplies”, Heather Nauert, Spokesperson of the US State Department and retired Rex Tillerson, said (23 August). “We will continue work to expand the choice of energy solutions in Europe, so that make the countries not depend on one or a dominant energy source”, she said. Since then, it seems to be the last statement by the US diplomat of such a high level of support of the EU’s energy ambitions.
Will the US continue to liberalize trade with the EU and abolish the tariffs in the aluminum and steel industry for the European companies to that end? Most importantly, how this will work in relation to the European energy market in the case of US energy exports. The question remains open as long as there is intrigue. It seems that the OPEC basket will remain within a consistently high price trend.
