All eyes on Biden’s Riyadh visit amid oil market uncertainty

All eyes on Biden’s Riyadh visit amid oil market uncertainty

All eyes on Biden’s Riyadh visit amid oil market uncertainty
US President Joe Biden. (Reuters)
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All eyes are on US President Joe Biden’s visit to the Middle East, as the movers and shakers in the oil market are waiting for the outcome of the visit and its likely impact on oil prices.
While writing this article, the oil market remains uncertain, volatile and faced with several challenges such as calls for unplanned energy transition.
Exxon expects oil markets to remain tight for another three to five years  because of a lack of investment in the oil and gas sector since the pandemic began, CEO Darren Woods recently told the Qatar Economic Forum.
Furthermore, the common objective of the Organization of the Petroleum Exporting Countries and the non-OPEC oil producers has always been to maintain oil market stability. The oil producers have been making all efforts since 2020 and serving as a safety valve for the market. 
Crude oil prices tumble amid worries that interest rate hikes by major central banks to curb inflation could slow the global economy and reduce demand for energy.
The US dollar rose to its highest level since December 2002 against a basket of currencies, making oil more expensive for investors using other currencies.
Market fundamentals are supported by petroleum products and signs of a recovery in Chinese demand and likely pickup in demand due to the driving season outweigh concerns about an economic slowdown.
China’s Shandong independent refineries have gradually ramped up utilization rates. The lifting of COVID-19 restrictions in some regions of China would increase the oil demand growth prospects in the coming months.
US energy companies added oil and natural gas rigs. The Energy Information Administration expects the output in major US shale oil basins to rise to 8.90 million barrels per day in July, the highest since March 2020.
The capacity for US oil refiners fell in 2021 for the second year in a row. The decline was due to closings of plants that were unprofitable when fuel demand cratered at the height of the COVID-19 pandemic. Despite the ending of the maintenance season, limited refinery capacity will continue to exert higher volatility.
The EU’s ban on insuring Russian ships increases uncertainty in the oil trade, and could add an additional risk premium to crude oil prices.
More than four months after Russia’s invasion of Ukraine, Russian crude oil, Urals, has seen a switch in flow from its traditional market Europe to Asia. India has emerged as the significant Urals importer in the region. So long as the Urals discount is maintained, it will have a huge margin advantage over alternative crude grades, meaning Indian refiners may increase Urals imports. 
 A strong rise in global inflation, its impact on monetary policies and consequently dampening effect on global economic growth have become visible, especially since the beginning of this year.
The anticipated gradual slowdown in the global economic growth dynamic toward 2023 may become even more accentuated, with a consequent impact on demand.
The coming visit of the US president will be the focus of the market to determine the way forward for market and prices behavior amid uncertainties over several energy issues.

• Mohammed Al-Shatti is a Kuwaiti oil analyst.

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point of view