The international market was in turmoil last week. Federal Reserve Chairman Powell reiterated at a congressional hearing that high inflation is temporary and the economy is still far from a complete recovery. U.S. stocks fell across the board, with the Dow falling 0.5% for the week, the Nasdaq falling 1.9% for the week, and the S&P 500 falling 1% for the week. OPEC+ reached an agreement yesterday evening to increase production by 400,000 barrels per day starting next month until the active production reduction of 5.8 million barrels per day is fully restored. In addition, the oil production benchmarks of many countries will be raised starting from May next year. Affected by this news, U.S. oil prices weakened slightly after opening early this morning, once falling 1% to $70.68 per barrel.
There are many things to watch this week. The U.S. Congress will vote on the infrastructure package, the European Central Bank will announce an interest rate decision, and differences on the inflation outlook may trigger internal discussions on tightening currency. Policy discussion. Major European and American economies will release July manufacturing and service PMI data, paying attention to whether the resurgent epidemic has had a negative impact on the economy. The Tokyo Olympics will open on July 23.
Major oil-producing countries reached agreement on production increase plan
July On the 18th, the 19th ministerial meeting of OPEC and non-OPEC oil-producing countries was held via video. The participating countries reached an agreement to gradually increase production starting from August this year. OPEC and non-OPEC members have reached the following consensus: first, to extend the OPEC+ production reduction agreement that began in April 2020 to December 31, 2022; second, to increase production by 400,000 barrels per month starting in August 2021. day until the active production reduction of 5.8 million barrels per day is fully restored; third, the production quotas of some oil-producing countries will be raised, effective from 2022. Starting from May 2022, the UAE’s new crude oil production reduction benchmark will be 3.5 million barrels per day. day, an increase of 332,000 barrels per day compared with the previous period. At the same time, the production benchmarks of Iraq and Kuwait will be increased by 150,000 barrels per day, and the production benchmarks of Saudi Arabia and Russia will be increased by 500,000 barrels per day. Fourth, it will be re-evaluated based on market progress at the end of 2021. Crude Oil Production Plan.
The communiqué pointed out that with the acceleration of COVID-19 vaccination, the economy continues to recover in most parts of the world, the fundamentals of the oil market continue to improve, oil demand shows obvious signs of growth, and economic cooperation and development Organizing a decline in national oil inventories. The meeting decided to hold the 20th Ministerial Meeting of OPEC and non-OPEC oil-producing countries on September 1 this year.
Regarding the production increase agreement at this OPEC+ meeting, Gui Chenxi, an energy analyst at CITIC Futures, told the Futures Daily reporter that investors need to pay attention to the following points: First, in addition to Iran Except for countries exempt from production cuts such as Venezuela and Libya, the current production reduction benchmark for the remaining 10 OPEC countries is 26.88 million barrels per day. After May 2022, the benchmark will be raised by 1.13 million barrels per day to 27.81 million barrels per day. Second, the current production reduction benchmark for non-OPEC production reduction countries is 17.17 million barrels per day. After May 2022, the production reduction benchmark will be raised by 500,000 barrels per day to 17.67 million barrels per day. Third, the crude oil production of OPEC and non-OPEC production-reducing countries in June 2021 was 22.62 million barrels/day and 14.92 million barrels/day respectively. According to the new quota, production can increase by 5.2 million barrels/day and 2.25 million barrels/day respectively. Then, OPEC+ can increase production by about 7.5 million barrels per day in total, of which 5.8 million barrels per day are from previous active production cuts and 1.7 million barrels per day come from the increase in production benchmarks. In addition, based on the average monthly growth rate of 400,000 barrels per day, it will take about 18 months to complete the production increase target. That is, after returning to the April 2020 level at the end of 2022, production will continue to increase in the second half of 2022 until the end of 2022.
OPEC+ has a clear path to increase production, and tighter crude oil supply is expected to continue
OPEC+ agreed to increase oil production, which will undoubtedly put greater pressure on oil prices. From the perspective of oil price valuation, Gui Chenxi believes that the commodity attributes and financial attributes of crude oil are at high levels in the first half of 2021. The destocking of crude oil has pushed up the supply and demand valuation, and the loose monetary policies of the world’s major central banks have pushed up its financial attributes. premium. However, in the second half of the year, the commodity and financial attributes of crude oil may face an inflection point, because OPEC’s unexpected increase in production will slow down the destocking speed, and the supply and demand valuation of oil prices may move downward. In addition, the Federal Reserve’s ultra-loose monetary policy may gradually tighten under high inflation pressure, and the financial liquidity premium will fall. Therefore, oil prices may face greater correction pressure in the short term.
Li Yunxu, energy analyst at SDIC Essence Futures, believes that although the path for OPEC+ to increase production is clear, the expectation of tightening crude oil supply is still difficult to reverse. “The July monthly reports of the IEA, EIA, and OPEC predict that the month-on-month increase in global demand in the third quarter of 2021 is 3.4 million barrels/day, 2.3 million barrels/day, and 2.92 million barrels/day respectively. The month-on-month increase in global demand in the fourth quarter is 130 million barrels/day respectively. 10,000 barrels per day, 1.11 million barrels per day, and 1.58 million barrels per day. Against the background of accelerating demand recovery, increasing production according to the results of the current meeting will be difficult to change the crude oil destocking trend in the second quarter, and even the destocking rate will increase.” He It is believed that investors should pay more attention to the evolution of market expectations. This OPEC+ meeting reached a consensus to increase production by 400,000 barrels per day in August. The adjustment of the production baseline will be limited and will not affect production during the year, which is basically consistent with the original proposal. But more importantly, the meeting continued to strengthen the OPEC+ principle of proceeding step by step, keeping a close eye on demand, and managing market expectations through high-frequency policy fine-tuning. The risk of supply exceeding expected releases has been reduced, and the short-term bias is bullish.
“Since the epidemic, the expected release of OPEC+ high-frequency meetings has intensified short-term fluctuations in the crude oil market, but it has reduced the risk of mid-term operation of oil prices to a certain extent. At present, the supply side of crude oil Uncertainty in the second half of the yearQualitatively, the first is Iran, the second is shale oil, and the third is the reduction in OPEC+’s active production cuts. “Li Yunxu believes that the fundamental data in the third quarter may continue to confirm the marginal increase in crude oil demand and the continued reduction of inventories. On the premise that macro risks are controllable, the probability of a complete turnaround in oil prices is not high, but it should be noted that inventories The inflection point does not exactly correspond to the price inflection point. The current oil price has entered the high range after the shale oil revolution, and OPEC+ has sufficient idle production capacity. When the demand-side data is eye-catching but cannot exceed expectations, the marginal possibility of negative effects on the supply side is biased. Large, oil prices may mainly fluctuate at high levels in the future.</p
