Monday , September 26 2022

Brent falls below $ 70 for the first time since April



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On Friday, oil prices fell to the level of an early year after concerns over US sanctions against Iran and before the night of a meeting of Abu Dhabi producer countries to discuss a possible reduction in the reduction in pumping.

Brent's tube, the European reference, for delivery in January dropped to 69.13 dollars in London at 10.45 am, the lowest level since April.

At the same time, "light sweet crude" (VTI), reference oil in the United States, for delivery in December fell to $ 59.28, the lowest since February, after losing more than 20% since October.

That month, oil prices have reached levels that have not been seen over the past four years: Brent has risen to $ 86.74 and VTI at $ 76.90 per barrel.

The markets were afraid that the second wave of sanctions announced by the United States against Iran would cause oil shortages in the markets.

On Monday, Washington imposed additional sanctions on financial institutions, shipping lines, the energy sector and oil derivatives from Iran.

This includes the sanctioning of Iranian oil buyers in order to deny Tehran, the second-largest oil producer after Saudi Arabia, from its main source of income.

This, coupled with international commercial tensions, could result in a decline in supply and a consequent price increase.

But, arguing that its intention was to reduce Iranian exports to zero barrels, the US administration reduced its position and ultimately agreed to the release of eight countries – including large consumers such as China, India and Japan – more than expected in the markets .

"Less negative" effect

"The sanction against Iran is better and better, it's important to note that its impact on the offer will be less negative than expected, mainly due to exceptions," explains Neil Vilson, an analyst at Markets.com.

Members of the Organization of Petroleum Exporting Countries (OPEC) and their partners, including the Russian giant, will meet in Abu Dhabi on Sunday to discuss possible cuts in production in order to protect their revenues from a continuing fall in prices.

The weekly data of the US Energy Information Agency indicate that the world's oil reserves, the world's largest consumer, have not stopped in the past few weeks, a tangible sign that supply far outstrips demand.

In June, OPEC and non-OPEC countries decided to open a tap to respond to the market's concerns, and the cartel should now confirm its role as a market regulator.

However, David Madden, an analyst at CMC Markets, believes that participants in the Abu Dhabi meeting probably do not take any direct action.

"I do not expect much from the oil meeting," AFP said.

"Oil producers can talk about a future reduction in production as a way to stabilize prices, but prices must first reach a balance, be low enough to maintain strong demand and maintain (President of the United States, Donald) Trump happy, but not so low that his revenue from oil drops drastically, "he explains.

On the other hand, the Vall Street Journal announced on Friday that a think tank funded by Saudi Arabia, the founding state and one of the OPEC pillars, is studying the possible impact of abandoning the cartel.

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