Price Performance Indicators

• Within a week (17/7 - 21/7) the price of ICDX crude oil strengthened 3.77 percent..  
• EIA reported a decline in crude oil stocks. 

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Market Review

The price of ICDX oil contract closed higher at $76.89 per barrel for the week ending July 21, amidst various market sentiments providing support for prices, including unexpected supply disruptions in Libya and Nigeria In the middle long-term production cuts being made by OPEC and Saudi Arabia, and declines in US crude oil stocks reported by the Energy Information Administration (EIA).

At an earlier meeting, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia this month agreed to extend further production cuts of 3.66 million bpd through 2024 and agreed to reduce their overall production target from January 2024 by 1.4 million bpd. and agreed on a new production target of 40.46 million barrels per day (million barrels/day). Saudi Arabia is also seen making massive production cuts of around 1 million per barrel in July.

Further supporting price movements, US crude oil stocks in the week were reported to have fallen by 708 thousand barrels, lower than the initial prediction which predicted a decrease of 2.44 million barrels and an increase of 5.946 million barrels in the previous week, said a report released Wednesday evening by the statistics agency government, the Energy Information Administration (EIA) for the week ending July 14. Gasoline stocks were reported to have fallen by 1.07 million barrels, lower than predictions which predicted a decline of 1.58 million barrels. The decline in stocks of both crude oil and gasoline indicates a positive pace of demand in the US energy market, although the growth is not as strong as expected.

In this week that put downward pressure on oil prices after the release of China's economic data, the National Bureau of Statistics reported that China's Gross Domestic Product (GDP) stood at 6.3% annually, worse than the forecasts of 7.3% and 4.5% previously, fears of an economic slowdown in China add to fears of a slowdown in demand considering that China is the second largest oil consumer in the world.

Market View

The Effect of The Fed's Decision on Oil

The Fed holds its Federal Open Market Committee (FOMC) meeting on July 25-26.The Fed's decision is important because it will have an impact on financial markets and the economies of many countries, given the US's large role in the world economy. It should be noted that higher interest rates increase borrowing costs, which can slow down the economy and reduce oil demand.

Saudi Arabia's Extended Production Cuts Expectation

Saudi Arabia is expected to extend its voluntary oil production cuts of 1 million barrels per day (bpd) for another month into September. It's worth recalling that Saudi Arabia earlier pledged to cut production by 1 million bpd in July as part of the OPEC+ deal in June that capped supply until 2024.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Source: ICDX Research