The COFR contract price on the Indonesian Commodity and Derivatives Exchange during the week was experiencing bearish trend and eventually closed down by 2.94% from the level of Rp 585,900 per barrel at the end of the previous week to the level of Rp 568,700. Returning to its main driving factor, oil prices have absorbed the discordant tone around the balance of the global supply and demand structure.
Previously, the Energy Information Administration (EIA) in its Short-Term Energy Prospects report released Wednesday, raised its forecast for US oil prices and crude oil production for 2020. However, prices weakened considerably after the US crude oil inventory data also disclosed by EIA in reports for the week ended in September 4 to rose by 2.1 million barrels. The increase was in spite of market predictions that previously estimated stocks would fall by 1.4 million barrels, due to ongoing production cuts at refineries along the Gulf of Mexico following Laura Hurricane.
Meanwhile, Turkey and the UN-recognized Libyan government, which controls the capital Tripoli and western Libya, are discussing oil and gas exploration in Libya, a Turkish energy official said on Thursday. Western Libya is home to the country's largest oil field, Sharara. If this cooperation is realized, then Libyan oil production which has slumped to the level of 100,000 bpd in July could again increase.
Going forward, some of the main focus that is still revolving around the headline of pandemics and natural phenomena such as hurricanes that threaten the activities of the oil industry, especially the US, will form a fundamental backdrop for prices. Still on the market’s eyes, the policies of some of the holders of the world's largest oil production will continue to be anticipated.
Saudi Arabia and Abu Dhabi Lower Oil Prices for October Delivery
OPEC's two main producers, Saudi Arabia and Abu Dhabi, jointly lowered their official selling prices for crude for October delivery. Aramco lowered its price by $ 1.40 a barrel, to a 50-cent discount below the regional benchmark for the first time since June for buyers in Asia. Meanwhile, Abu Dhabi lowered its price by $ 0.50 per barrel or decreased by $ 1.35 compared to the September’s selling price. The decisions of the two OPEC producers indicated the possibility of sluggish demand for fuel amid the turmoil of the COVID-19 virus, as well as adding to fears of excess oil supply in the market. On September 17, the OPEC + market monitoring panel will meet to discuss the latest conditions in the oil market. Analysts predict that despite the recent decline in oil prices, OPEC + will prefer to direct its members to comply with current commitments, rather than encourage further production cuts.
US-China Tension Worsens, Global Economic Recovery Threatened
The relationship between the two giants of the world economy, namely the US and China, is getting worse, especially entering the campaign period in the US Presidential election in November. Last week, Trump threatened to punish any US company for creating overseas jobs and bar those doing business in China from winning federal contracts. In addition, the Trump administration has also signaled to consider a ban on some or all products made with cotton from China's Xinjiang region over allegations of human rights abuses. China retaliated by conducting an anti-subsidy investigation on several imports of glycol ether from the US starting September 14. In late August, China launched an anti-dumping investigation into imports of the same product from the US. The worsening relationship between the US and China threatens the global economic recovery which is currently being hit by the second wave of Covid-19. If it continues, then the current sluggish global oil demand could worsen.