By Chrysostomos Tsoufis

The almost simultaneous announcement did not cause any impression Saudi Arabia and Moscow that they will reduce the supply of oil to the world market in an attempt to put a… floor on the oil price slump.

Riyadh decided to extend production in May as well by 1 million barrels/day, and Moscow “quieted” with a decrease by 500,000 barrels/day from its exports. And if things get “tight”, according to Deputy Prime Minister Alexander Novak, he intends to reduce its production even more.

Since the beginning of the year, and against the majority of forecasts and of course against the decisions to reduce production by OPEC and unilaterally by S. Arabia and Russia, the price of black gold has fallen by 12%. Since April 28, it has been permanently below $80, while on June 12, it was also at $71, which was a six-month low. Prices which are unacceptable to S. Arabia which, as we have written before, wishes to function as the Central Bank of oil.

As if all this wasn’t enough, oil, specifically the Brend and West Texas varieties, is the only commodity whose price is constantly falling. Analysts on the CNBC broadcasts showed the stunned anchors their computer screens showing that prices of natural gas oil, natural gas in the US and Europe, grains, copper have started to recover steadily, naturally exacerbating the Saudis’ dismay. .

Recession fears that persist as long as the Chinese dragon does not say to… take off and as long as monetary policy tightening continues – on July 27 the ECB will announce the 9th rate hike in a year– they cast their heavy shadow on prices.

In addition to sanctions, countries like Russia and Iran always seem to find ways around them. Consequently there are enough quantities for everyone and as long as this happens, prices do not rise.

In all this, there is also a technical reason that keeps prices low. Brent and WTI are rich in naphtha, which is used in the petrochemical industry in bulk. But this sector has suffered the most damage since the pandemic and since, due to the sharp increase in plastic as a substitute.

After the announcements of the 2 oil giants the price of black gold recovered to $76, of course far from being considered satisfactory for the oil producing countries.
However, most analysts still believe that things from in autumn they will change, the market will “tighten” and prices will rise, however they will hardly reach $100 as estimated at the beginning of the year by Morgan Stanley and Goldman Sachs.

If one believes the head of the International Energy Agency, then winter may bring a new energy crisis. Once again, Fatih Birol emphasized through the BBC the risk of energy prices skyrocketing if China “wakes up” and starts “devouring” energy like there is no tomorrow. The Turkish economist did not rule out a blackout winter as part of what he said was the game.