Oil: Saudi Arabia new agreements oust Russia from the Chinese market

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Last week, the decline in world oil prices halted and even moved to a small increase in anticipation of negotiations on the oil market in the course of the G20 summit in Argentina, as well as in anticipation of reaching agreements on OPEC+ on the resumption of the limits of oil production. While the probability of concluding agreements on the reduction of production exists, although the specific amounts will be discussed at the OPEC meeting in Vienna, 6-7 December 2018.
As a result, the price of oil WTI in the past week have dropped to $49,61 per barrel and Brent crude to $58,08 per barrel. The spread between grades of oil as of November 29, 2018 $8,1, against the spread to the price of WTI was 15.7%.
While among producers there is an active exchange of opinions and bargaining, whereby it is possible to note that the majority supports a reduction in production of 0.5-1 million bar. a day that will leave a sufficient amount of oil on the world market and will not lead to a sharp recovery in prices.
Also during the G20 summit scheduled bilateral meetings, in particular, the Prime Minister of India met with the crown Prince of Saudi Arabia to discuss Saudi investments in India, the supply of oil and agricultural products, as well as increasing the volumes of mutual trade.
Also expected bilateral meeting, XI Tszinpina, D. and trump, Vladimir Putin and crown Prince of Saudi Arabia Mohammed bin Salman, in spite of the exaggerated scandal of the murder of the journalist.
The Russian side is inclined to the reduction of the production of 100-150 thousand. in the day, President Vladimir Putin said that Russia will continue to work with the OPEC countries to normalize the situation in the oil market in case of need. In addition, the President said that Russia is satisfied with the price of oil at $60 and was informed that the discipline of the Covenant OPEC+ in November was 100%, the main credit belongs to the crown Prince of Saudi Arabia.
Meanwhile, it is reported that Saudi Arabia has increased oil production in November to 11.3 million bar. a day, which led to lower prices by $20. Also increased oil supply to the market of Oman and Iraq.
However, Russia is considering signing the OPEC countries+ a long-term agreement on the regulation of the oil market. In the first place the question is raised about the situation and the market balance in 1 and 2 quarters 2019
The G20 summit also can clarify the situation for trade wars, especially between the US and China, which negatively affect the world oil consumption through demand slowdown. However, a special breakthrough in this matter is not expected.
In the next two weeks, the oil market will remain highly volatile in terms of key events: the G20 meeting noara 30-December 1, 2018 and the second OPEC summit in Vienna on 6 and 7 December 2018.
Total reserves of oil and oil products in the United States on November 23, 2018 rose by 0.4 million bar. and built 1904,8 million bar. Crude oil inventories for last week increased by 3.6 million bar. to the same date last year, oil imports rose to 8,162 million bar. a day, exports rose to 2,442 million bar. per day, domestic production amounted to 11.7 million bar. a day.
As of 23 November 2018 the oil reserves in Cushing amounted to 36.5 million bar. vs 35.3 mln bar. the week before last and 58.3 million bar. a year ago. Stocks in the strategic reserve again decreased by 2 million bar. to last week and made 650,6 million bar.
According to Baker Hughes, as of October 21, 2018 number of oil wells in the US fell by 1 unit to the previous week and amounted to 885 units against 747 units in 2017.
According to Reuters, oil imports to China in November 2018 rose to 10.29 million bar. as compared to 9.61 million bar. a day. in October 2018.
According to GAC, imports of Russian oil in October grew by 58% yoy to 7,347 million tons, or approximately 1.73 million bar. per day, reaching a historical peak. For the last 10 months. 2018 Russian oil imports to China increased by 16.6% 57,91 million tonnes to 1.39 million bar. a day.
The demand for oil imports in China reached a record high in October and is estimated to continue to rise until the end of the year, as independent refineries tend to use the import quotas and falling prices.
According to Saudi Aramco, the company intends to sign with the Chinese side, five agreements on the supply to about 1.67 million bar. of oil per day. Reuters survey, Saudi Arabia new agreements oust Russia from the Chinese market, and the share of the Saudi supply will increase in 2019 to 17% of total oil imports. Exports of gasoline from China in October fell to the lowest level in 13 months up to 650 thousand tonnes against the excess gasoline in the Asian region. The demand for middle distillates in Asia remains strong, which explains the sharp increase in the export of diesel fuel and kerosene in China last month to 1.44 million tonnes 1,209 million tonnes, respectively.
Oil imports in Japan in October 2018, according to METI, increased by 5.5% in annual terms, amounting to 3.09 million bar. a day.
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Oksana Lukicheva
Analyst of commodity markets,
“Opening Broker”