Crude oil futures recorded losses of 12 percent in trading last week as a result of banking turmoil from the bankruptcy of the US Silicon Valley Bank, causing fears of a new global financial crisis, and growing expectations regarding the continuation of the US policy to raise interest rates.
Brent crude ended last week’s trading at USD 72.97 per barrel (pb) on Friday, while US West Texas Intermediate crude closed at USD 66.74 pb. These declines were driven by an unexpected rise in US commercial crude oil inventories to 1.6 million barrels.
In this regard, Kuwaiti oil analyst Firas Al-Salem told KUNA that the current fluctuation in oil prices comes after the announcement of the return of diplomatic relations between Saudi Arabia and Iran, which paves the way for a decrease in geopolitical tension in the region, producing over 20 percent of the world’s oil production.
Al-Salem, who also holds the position of chairman of the Kuwaiti Business Council in Dubai, added that waving the American No Oil Producing and Exporting Cartels (NOPEC) bill reinforces some fears by speculators in the global oil market and puts pressure on daily market prices, noting that the collapse of US banks has an impact on confidence in the global economy as a result of raising interest from the Federal General Reserve which was accepted greatly after the COVID-19 pandemic crisis.
The bankruptcy of some banks and the diminishing ability to borrow will curb economic growth in the upcoming period, which will weaken the demand for energy derivatives and reduce corporate profits in general and the cost of production for industrial companies in particular, which is a direct impact on the imports of major industrial countries from petroleum derivatives, he explained.
The challenges facing the Organization of the Petroleum Exporting Countries (OPEC+) alliance, which consists of non-OPEC countries, are the same and have not changed for a long time, as the NOPEC draft law is not recent, but rather began circulating since 2008, that is before the establishment of OPEC+, he indicated.
He pointed out that the US pressure on the alliance comes to reduce prices, but the nature of the global economic trend and the lack of confidence after the collapse of giant Western financial institutions will automatically lower prices.
He expected, with the decline in oil prices, that the NOPEC bill would be postponed in the US Senate, which happened previously, since what is most important within the US has emerged, which is preserving Americans’ jobs and the cohesion of financial institutions.
Members of OPEC have repeatedly announced their plans to increase their oil production to keep pace with the increase in global demand for oil and energy, he said, stressing that the members of OPEC and OPEC+ will determine their production policy according to the technical data of the global market to ensure supplies smoothly.