Behind this collapse, which took the Barrel to values that had not been seen for more than seven months, leaving as a mirage the records of more than a decade that emerged as a side effect of the war in Ukraine, is the tremendous uncertainty between the data of near panic with the big western economies, drowned in inflation, unemployment and the threat of recession, and the possibility of Russia cutting off all energy exports to the entire West that supports Kiev in its war with Moscow.
The signs that something incandescent was about to happen emerged early in the morning, with the charts of the most important markets for the oil business projecting warning signals on all lines.
Despite having recovered slightly, in the middle of the morning, after its worst performance, at the beginning of today’s session, 07, in almost seven months, having reached so low, it was clear that there was a problem in the markets and that the maintenance of the value of the above 90 USD would no longer be possible in a short time.
Flaming inflation in the major western economies and the blazing appreciation of the US dollar are some of the reasons oil-dependent economies will feel a jolt in the coming weeks, if not the next few hours.
Galloping inflation, risk of recession in the US and Western Europe, unemployment at levels not seen in decades in the most powerful economies on the planet and unsympathetic data on the Chinese economy, which is the world’s largest importer of crude, which gives the giant the power to infect the world’s crude oil business with a “pneumonia” with just one sneeze, are the labyrinth from which oil has to come out, which all analysts admit is possible but very difficult.
A little help so that the barrel does not show the bottom came from OPEC+, the “cartel” led by Russia and Saudi Arabia since 2017, joining the 23 exporting countries (OPEC) and 10 misaligned ones headed by Moscow, which in its September’s monthly meeting advanced a measure that had not been used for a long time, to reduce the association’s global production by 100,000 barrels a day instead of increasing it, as it has been doing since mid-2021.
Currently, OPEC+ is responsible for around 50% of the world’s crude oil production, which, with slight fluctuations, amounts to around 100 million barrels per day (mbpd), and its willingness to exert pressure on the markets to force its balance through increases or reduction of production, can be a firewall for eventual collapses, what I would be, for example, a passage below the threshold of 90 USD in Brent and 80 USD in WTI in New York.
However, as it became clear earlier this month, Russia, one of the three giants in the sector, with the US and the Saudis, does not seem to be very willing to cede part of its extraction to this OPEC+ strategy, not least because it is dealing with pressure due to the heavy sanctions applied by the USA and the European Union on their energy products after the invasion of Ukraine, on 24 February, which could weaken this last defensive line of the sector in the face of the pressure exerted by the negative data that are emerging from the major world economies, which are both the biggest consumers of crude oil and natural gas.
This Wednesday, around 15:00, Luanda time, the barrel of Brent was being sold at 89.44 USD, a loss of 3.51%, in London, after having reached, throughout the session, at 93.8 USD, while in New York, in WTI, the measure reached 85, although it recovered to 87.23 USD at the same time. It was at 83.41 USD also at 15:00, melting over 4% of its value.
As for what is expected of the global raw material market in the near future, which, of course, will receive special attention from the Angolan Government – which never reveals its position within OPEC, of which it has been a member since 2007, and when what it does is belatedly -, according to the most rated analysts, it is not necessarily good, because the existing data on the planetary economic whole are not good either.
And one of the data points to this is the strong appreciation of the US dollar, which, whenever it occurs, as is the case today, puts downward pressure on the value of the barrel, because countries need to use more of their national currency to acquire the dollars with which crude is traded around the world, with the exception of some bilateral negotiations almost always involving Russia and its closest allies, such as China or India.
Another is the return of the fear of Covid-19 with the arrival of winter in the Northern Hemisphere, where the world’s major economies are located, as already seen with the growing confinements in large Chinese cities, one of the reasons for the reduction of energy consumption in the country. world’s second largest economy.
And yet another is the sharp rise in interest rates by the central banks of the USA and Europe, a preferred tool to mitigate the flaming inflation, but which can have as a side effect an even more pronounced rise in unemployment and the concomitant demand for refined fuels and unrefined.
It is not known what Angola’s position is, as usual, on this situation in which OPEC members are called upon to respond together in the face of “attacks” on the markets to reduce the prices of the barrel, as an example of the decision taken months by the US and its closest allies to flood markets with some of their strategic reserves to crush prices. But it is known that Angola is one of the most affected countries.
In the background of this complex “poker game”, with everyone wanting to pretend that the small cards they have in their hand are “aces”, is the Western demand to crush energy prices because it is this sector that contributes the most for the inflamed inflation that corrodes their economies and threatens with a recession on the horizon that could lead to a storm of unemployment, the almost certain recipe for an increase in popular protests and with greater political-electoral consequences, which is what scares the most western democracies.
Some countries are more attentive than others to these movements, such as those that are most dependent on crude oil exports.
And Angola is clearly at the forefront of this attentive audience of the oil “grand jeu” between the West and Russia, because crude oil still accounts for 95% of its exports, more than 35% of its GDP and about 60% of its revenues. that guarantee the “lubrication” of the functioning of the State.