In search of balance: how can change world crude oil prices until the end gadacemata link
19:16

Vladimir Agoev
Monday, 18 November, the world prices for oil decrease after a sharp rise in the last days. Volatility of stock analysts attributed to the ongoing trade negotiations between the US and China. Termination of the tariff war between the two countries should restore the global demand for energy sources. While support for the oil quotes has a record with 2017 decline in drilling activity in the United States, as well as news about the imminent IPO of the Saudi company Saudi Aramco. Through the sale of shares of the Corporation, the government of Saudi Arabia would like to attract nearly $25 billion, and therefore interested in the high cost of oil. How can change the price of energy to the end of the year at RT.

  • © David McNew/Getty Images/AFP

Monday, November 18, the world oil prices show mixed trend in the course of global trades. In the beginning of the day the cost of raw materials of benchmark Brent crude rose 0.3% to $63,5 per barrel, then decreased to $62,7. This is evidenced by the exchange ICE in London.

Oil prices fluctuate after record growth last days. So, during the previous trading session on 15 November Brent crude oil rose to $63.6. The figure was the highest since the end of September.

As explained in an interview with RT the head of the analytical Department AMarkets Artem Deev, at the moment, the oil market players are counting on a quick end to tariff wars with China. Thus, the possibility of signing a trade agreement between the two countries supports commodities.

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«The process of negotiating trade deals between the US and China is now the determining factor for the cost of a barrel. Amid the global economic slowdown is the successful outcome of the negotiations between Beijing and Washington will be able to give the necessary impetus and stimulate demand for oil. This, in turn, will lead to a rise in oil prices,» — said Deev.

On 16 November, the representatives of the States and the PRC discussed on the phone the first part of a commercial transaction and «agreed to maintain close contact». This is stated in the statement of the Ministry of Commerce of China. Earlier during a speech at the Economic club of new York, Donald trump said of the possibility of signing an agreement in the near future.

Recall that in 2018, the United States launched a trade war with China. States has accused China of illegally obtaining U.S. technology and increased duties on imported Chinese goods. Beijing has imposed retaliatory measures. After a series of negotiations in may 2019 Washington went to the aggravation of the conflict: in addition to the introduction of new fees us technology companies have begun to cease cooperation with Huawei. In August, the country once again failed to reach a compromise on the terms of a commercial transaction and since September has introduced a new mutual constraints.

«The drop in oil prices from April to September 2019 from $75 to $56 per barrel was connected mainly with the risk of an escalation of trade wars and the slowdown of the largest economies in the world. Therefore, posts last weeks about the proximity of the signing of the deal and even the possible cancellation of a previously entered mutual high duties gave rise to optimism in the market risk assets and oil,» — said in an interview with RT the head of a group of analysts CAPT mark in real.

  • Reuters
  • © Bob Riha Jr.

The output of the giant

According to analysts, additional support for the oil prices have a news about the planned entry into the stock market of Saudi state-owned Corporation Saudi Aramco. Before the end of the year, the largest oil company in the world could hold the first offering of its shares (IPO) on the stock exchange Saudi Arabia Tadawul.

17 November, Saudi Aramco announced the intention to sell in the IPO of 1.5% of the securities. According to the company, the value per share will be around $8-8,53. The final price will be announced on 5 December.

«Market players understand that before the IPO Saudi Arabia will do everything to maximize oil prices. The placement of securities will be held before the meeting of the countries — members of OPEC transaction+, which will discuss measures to support oil prices. There is a high probability that the parties to the Treaty to extend the agreement to limit production. And OPEC, the Saudis are preparing the market for it,» said mark real.

According to Saudi Aramco, the company’s authorized capital consists of 200 billion shares. Thus, the total value of the company is estimated in $1,6—trillion of 1.71 and the sale will feature about 3 billion securities worth $24-25,6 billion.

Note that the value of Saudi Aramco exceeds indicators of the most expensive companies on the world stock market. For comparison: at the moment the market value of Apple is $1.18 trillion, the Microsoft of $1.14 trillion, Alphabet — $920 billion Amazon — $862 billion Such data results in the NASDAQ.

  • Reuters
  • © Hamad I Mohammed

The idea IPO Saudi Aramco has been offered in 2016, and has become one of the main points of the reform program of Saudi Arabia «Vision 2030». The strategy aims to change the structure of the economy and reducing dependence on the Kingdom’s oil. According to experts, the implementation of these plans requires a lot of budget injections. A significant portion of these investment authorities are going to attract through the sale of shares of Saudi Aramco.

«The main purpose of IPO is to attract investment in the Saudi market and increase the level of the stock exchange Tadawul on the background of other global financial markets. Such a step will strengthen the desire of investors to actively invest in the Saudi market. Thus, the government can implement the necessary diversification of the economy to relieve the country from dependence on oil,» — said in an interview with RT economic analyst Ahmad Yasin.

Weak drilling

A positive factor for oil prices analysts also believe the noticeable decline in drilling activity in the United States. From 8 to 15 November, the number of drilling rigs in the United States fell by 10 units to 674 units. According to oilfield services company Baker Hughes, the value was the lowest since April of 2017.

It is noteworthy that the number of drilling rigs has been declining for a fourth straight week. Such statistics have traditionally signals the investors about the decline in world oil supply and causing prices to rise.

«The reduction in drilling rigs is due to the expected slowdown in oil demand in 2020, as well as limited pipeline capacity in the United States. Existing pipelines has been unable to pass increased amounts of oil on the background of growth of production in 2017-2018. That is why shale companies ceased to develop new wells and focused on existing,» — said in an interview with RT, the Director of the office of sales «BCS» Vyacheslav Abramov.

At the same time, oil production in the United States is still continue to grow. According to the latest us Department of energy, last week’s production of energy resources in the United States increased by 200 thousand barrels per day to 12.8 million barrels a day. According to Abramov, the dynamics holding back the further growth of oil prices.

In anticipation of the Dec

Estimated Artem Deev, in the near future, oil prices will continue to be in the range of $61-63 per barrel. As suggested by mark Goikhman, a significant growth of quotations can occur in December. According to the expert, will depend on the dynamics of negotiations between China and the United States, as well as the outcome of the OPEC meeting+.

«December can be a determining oil prices. If Beijing and Washington will sign the trade agreement, and the members of OPEC deal+ to extend the term of the contract, the cost of a barrel of Brent could rise to $66 and above. Otherwise there are risks of decline in prices in the neighborhood of $58-60,» said mark real.

If China and the United States again fail to agree on the terms of a commercial transaction, and oil prices will start to decrease, the OPEC members+ can further reduce the extraction of energy resources. So, the supply of hydrocarbons in the world will begin to decline, but rates will start to rise. About this in an interview with RT told the head of Department of analytical researches «Higher school of financial management» Michael Kogan.

«A successful IPO for Saudi Aramco, the Saudi authorities may insist on the extension of operating limits of oil production OPEC+ $ 1.2 million bpd to support crude oil prices», — the expert believes.

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