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Oil rose due to tensions in the Middle East and despite the Fed’s decision

Oil rose due to tensions in the Middle East and despite the Fed’s decision
Oil rose due to tensions in the Middle East and despite the Fed’s decision

Brent futures rose 68 cents, or 0.83%, to $82.68 a barrel, and West Texas Intermediate in the United States (WTI) they gained 60 cents, or 0.77, to $78.50.

The situation in the Middle East and the Fed’s decision

The Palestinian group Hamas has proposed numerous changes, some unworkable, to a US-backed proposal for a ceasefire with Israel in Loop, said the US Secretary of State, Antony Blinken, adding that the mediators were determined to close the gaps.

The war has not yet materially affected the world supply of Petroleum, But investors priced in the risk, boosting futures prices.

Meanwhile, investors were disappointed after the Fed delayed the start of rate cuts likely until December, with a single quarter-percentage-point reduction forecast for the year.

Higher financing costs tend to slow economic growth and, by extension, could limit demand for oil.

Offer and demand

On the other hand, the International Energy Agency (IEA), the United States Energy Information Administration (EIA) and the Organization of Petroleum Exporting Countries (OPEC) have updated their forecasts on the balance between global crude oil supply and demand for 2024.

Their reports imply a limited decline in prices in the second half of the year because all three forecast declines in global oil inventories, Tamas Varga of brokerage PVM told Reuters.

These views were reinforced by industry data on Tuesday, which showed that US crude inventories fell more than expected last week.

Prices fell more than 2% last week, after the OPEC and its allies said they will gradually eliminate production cuts starting in October.

In the afternoon, the inventory data of the EIA, the statistical agency of the US government.

Also, the Consumer price index American will give more clues about the interest rate policy of the Federal Reserve, whose monetary policy announcement will be known later, at the end of its two-day meeting.

IEA predictions

The International Energy Agency (IEA) expects a “significant surplus” in the markets of Petroleum by 2030, due to a slowdown in demand growth and increased global production, according to an annual report published this Wednesday.

As the energy transition progresses, with the rise of renewable energies and electric vehicles, “the growth of global oil demand should slow down in the coming years,” the IEA stressed in the report.

The document is based on “current policies and market trends” and notes that “strong demand from rapidly growing Asian economies as well as manufacturing sectors is expected to aviation and the petrochemistry, will boost the consumption of Petroleum in the next years”.

But at the same time, “these gains will be increasingly offset” by factors such as “increased sales of electric vehicles, improvements in the energy efficiency of conventional vehicles, reduced use of oil for power generation in middle East and structural economic changes”.

The IEA predicts that global demand for Petroleum, including biofuels, “will stabilize around 106 million barrels per day towards the end of the decade”, compared to just over 102 million barrels per day in 2023.

An increase of just under 4%, driven by the economies of Asia, in particular China and India, while demand declines in advanced economies.

“At the same time, global oil production will need to increase, which will ease market tensions and raise additional production capacity to levels never seen outside of the Covid crisis,” the report highlights.

The increase in global supply of black gold, driven by non-OPEC+ producers, especially the United States, should exceed expected demand from 2025.

Total supply capacity should reach almost 114 million barrels per day in 2030, exceeding global demand estimated at 8 million barrels per day.

This surplus production “could pave the way to an environment with lower oil prices,” underlines the IEA.

In this environment of “significant excess supply,” “oil companies may want to ensure that their strategies and business plans are prepared for the changes underway,” said IEA Director General Fatih Birol, quoted in the statement. .

Source: Ambito

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