Amidst the many challenges and fears of a global recession, oil prices still provide a good resilient performance, better than stock indices and the US dollar.
This is despite the contribution of escalating Western sanctions against Russia to further restrict crude supplies to an already tight market.
Data from the Refinitiv Eikon platform shows that futures contracts for the two main benchmark crudes, Brent and the American NYMEX, are up about 30% so far this year, while the global stock index, which includes all countries, is down about 15%.
The 47-country stock index (MSCI) suffered its biggest first-half decline since its inception in 1990, while inflation hit a 40-year high and central banks raised interest rates.
The data revealed that the dollar index, which measures the value of the green currency against a basket of other major currencies, has risen about 10% so far this year.
“Low oil inventories and diminishing spare production capacity are the drivers of oil’s rally,” said Giovanni Stonovo, an analyst at UBS.
For most of the past two years, the production of the OPEC + alliance has been below the agreed production levels while many members of the group are facing problems with production capacity. Internal OPEC + data shows that the supply shortfall amounted to about three million barrels per day in June, or about three percent of global supplies.
OPEC countries did not reach their production targets last July, despite the increase achieved by some of the organization’s countries, according to a Archyde.com survey published on Monday, while the level of strategic oil reserves in the United States fell to its lowest level since May 1985, according to data from the Ministry of Energy announced today.
According to the results of the survey, “OPEC” pumped an additional amount of oil, amounting to 310,000 barrels per day, in July, compared to June.
The survey showed that the production of the Organization of the Petroleum Exporting Countries rose to 28.98 million barrels per day of crude last month, and about 240 thousand barrels per day came from the increase of 310,000 from the ten OPEC producers covered by an agreement between the organization and allies led by Russia, in what is known as the OPEC + group, they pledged It has a production increase of 412,000 barrels per day.
It is not expected that OPEC + will decide on another increase in production at its meeting next Wednesday. A source in the group said, “It is unlikely that the meeting will witness a surprising result in terms of an increase in production,” according to Archyde.com.
After a sharp decline in June due to turmoil, production in Libya recorded a slow recovery and by the end of the month returned to normal levels.
The largest drop in production, of 70,000 barrels per day, came from Nigeria, where outages and maintenance work were curbed, while production stabilized in Iran and Venezuela.
Craig Erlam, an analyst at OANDA brokerage, said that stocks were negatively affected by various developments, including the price of oil itself, which contributes to a sharp rise in inflation.
While JP Morgan revised downward its forecast for global oil demand for this year and next, it says the oil market has not yet accounted for a recession.
The bank added that while historical evidence indicates that demand for oil is well supported as long as global growth remains positive, crude prices tend to fall in all recessions by between 30% and 40%.
Some analysts warn that the price of a barrel of oil may exceed $200, which could easily push Western economies into recession; According to the New York Times,
The International Monetary Fund had lowered its forecast for global economic growth to 3.2% for 2022, by 0.4% from its forecast published last April. The IMF expects the global economy to grow by 2.9% in 2023.
For the United States, the Fund’s forecast for April fell by 1.4% for this year to 2.3%. While the Fund expected the eurozone economy to grow by 2.8% in 2022, and by 1.6% in 2023.