Crude oil prices showed an overall upward trend last week. After officially breaking through the previous high the previous week, the effectiveness of the breakthrough was further confirmed last week, causing the overall range of crude oil prices to move from 40-46 US dollars per barrel to 46-46 US dollars/barrel. At US$50/barrel, there is a further upward trend due to bullish optimism and market stimulation.
The focus of the market last week was mainly on the OPEC meeting, which will determine whether to delay the production increase. The overall supply and demand pattern of the crude oil market in the first quarter will also determine the overall operating range of crude oil prices. Despite difficulties ahead of the meeting, OPEC reached an agreement Thursday night.
This meeting reached an agreement to slowly increase production, which is not as long as the three-month extension of the production cut previously expected by the market, but it can at least maintain the supply and demand balance in the crude oil market in the first quarter of next year, which is important for Stabilizing oil prices plays a certain role. Specifically, OPEC+ ministers have reached an agreement on production in the first three months of next year and will meet in the first week of each month to decide on the increase in production for the next month, but it should not exceed 500,000 barrels per day.
In addition to OPEC, the U.S. bailout plan also seems to be making good progress. Given that Democrats seem to have given up on insisting on a multi-trillion-dollar stimulus package, Congress will reach an agreement before the end of the year. The odds of agreement increase. Goldman Sachs expects the two parties to reach an agreement on a $700 billion stimulus package, which is equivalent to taking the middle value between the Republican proposal and the proposal of the cross-party group.
Affected by macro factors, the global financial market reacted violently. The U.S. dollar index fell sharply and fell below 91 points. It has now returned to the lowest point since April 2018, while commodities have Continuing to surge upwards, both copper and crude oil prices showed a strong pattern, and the expectation of a release of water from the United States once again supported the rise of global commodities.
However, judging from the current rise in commodities and the decline in the US dollar, how long this trend can last remains to be verified. After the OPEC meeting, the only thing that can continue to stimulate bullish sentiment in the market is That leaves vaccines. Technically speaking, there will be a wave of correction during the rise from US$35/barrel to US$50/barrel, so investors who missed the opportunity to get on board in the previous wave can wait patiently for the market to give a relatively low price before going long on dips.
The OPEC meeting had no bright spots
As early as last week’s meeting, the market began to hear rumors Various inconsistent remarks, especially the UAE’s announcement that it will withdraw from the OPEC+ production reduction alliance, have provided a trigger for panic in the market. Before the meeting began, other oil-producing countries also expressed slight criticism about production cuts, and the meeting was postponed from Monday to Thursday.
But in the end, an agreement was reached. Production in February next year will be determined by the next OPEC meeting. This gives the market a buffer period and will not balance supply and demand when demand is weakest. A fatal blow to the market. This result has actually been expected by the market, so it did not cause too much disturbance to the market.
Judging from the specific production increases, various countries only increased production slightly, with Saudi Arabia increasing by approximately 126,000 barrels/day, Russia increasing by 126,000 barrels/day, and Iraq increasing by 53,000 barrels/day. days, other countries’ production increases are less than 40,000 barrels/day, and OPEC+’s cumulative increase is about 482,000 barrels/day. The impact on the overall supply side is limited. China’s demand will continue to improve after January, and the market is expected to remain stable for some time in the future. Maintain a relative balance between supply and demand.
Another variable on the supply side deserves our attention. Venezuela announced the restart of oil exports to China. This is a signal of the impact of the supply side on the market before Biden is about to take power. We have previously analyzed that under Biden’s administration, sanctions on Iran and Venezuela are expected to be relaxed. It is reported that China has already sent oil tankers to Venezuela. It is expected that Venezuela’s crude oil production is likely to rebound, so the supply-side variables will also be more unstable. .
Looking at the overall pattern, the current upward momentum that the supply side can provide for prices has been basically exhausted. Countries such as Saudi Arabia are trying to push up oil prices. However, each oil producer Even if the country has exhausted its body, it can only maintain the price in the range of 45-50 US dollars per barrel. Therefore, the focus of the supply side in the future is not the efforts of oil-producing countries to make crude oil prices rise. Instead, as prices soar, oil production Will domestic differences affect the balance of supply and demand?
Will the demand side begin to exert force?
The development of the global epidemic is still not optimistic. However, the market is relatively optimistic due to the positive stimulation of vaccines. We still have certain doubts about whether the vaccine promotion progress can keep up with the market growth. . As of December 3, the number of new confirmed cases worldwide reached 664,000, setting a new record high again, and the cumulative number of confirmed cases reached 65.35 million. From a regional perspective, control in Asia is basically stable, while Europe has begun to decline steadily, indicating that the early blockade and Europe’s anti-epidemic efforts have been effective.sexual effect.
However, the number of confirmed cases in the United States in a single day hit a new high. Judging from the data, the number of new confirmed cases in the Americas in a single day reached 316,000, and the number of new confirmed cases in the United States also reached a record high of 220,000. Most of the new confirmed cases in the Americas came from the United States, and the number of new confirmed cases globally came from the United States. Half of the confirmed cases are from the Americas, and 1/3 are from the United States! The number of new confirmed cases in India has begun to decline significantly. As of December 3, India had 38,000 new confirmed cases in a single day, compared with 46,000 a month ago and 75,000 two months ago.
Effective epidemic control is a prerequisite for economic recovery. We have recently seen that India’s economic data has improved significantly, especially India’s refined oil consumption data has returned to normal. The recovery speed of India’s crude oil processing volume and import volume is still relatively slow, indicating that the Indian market is beginning to gradually digest refined oil inventories.
There has been constant good news about vaccines recently. The UK has approved the US vaccine for sale and will start vaccinations in the near future. Russia also plans to popularize vaccines nationwide in the near future. It seems that this fight against The battle against the epidemic has come to an end. Crude oil markets performed strongly on optimism. However, Fauci has recently expressed concern that the UK approved vaccines too quickly, and US vaccine companies are also facing production capacity problems. It is difficult to predict when the battle to end the epidemic will begin and when it will be completely ended.
The library removal process is obvious
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The changes in inventory show that the global market is still in a relatively tight supply stage, especially the decline in floating tank inventories. Before we look at the inventory, we first need to look at the global floating tank inventory, which has relatively high storage costs. Judging from the data, the number of floating tank inventories has begun to decline on a large scale recently, which is the first step in the destocking of global crude oil. Only after digesting these higher-cost inventories will we see a massive decline in onshore inventories.
From a data point of view, global floating tank inventories continue to decline, mainly due to the rapid decline in Asian floating tank inventories. Driven by demand from China, the number of floating tank inventories near China has quickly fallen to the normal range, which is a potential positive for the future fundamental market.
Another higher-cost inventory is China’s SC crude oil warehouse receipts. The cost of this part of warehousing is much higher than that of ordinary commercial inventory. We have also seen the number of SC warehouse receipts recently. decline, once the time is right, SC crude oil will lead the global market again. In recent times, SC crude oil has suddenly exerted force to drive the external market price to jump, which is a preview of potential future market conditions. Therefore, funds with long allocation can choose the SC market to obtain excess returns brought by strong varieties.
Recently, we have observed U.S. commercial crude oil inventories and OECD commercial crude oil inventories and found that the process of destocking is proceeding slowly, but it is not enough to change the oscillation pattern of the crude oil market. Only when the demand side After the rapid recovery drives the inventory side to accelerate the decline, we will be able to see a new upward trend in prices.
In summary, after the OPEC meeting, the bullish effect on the crude oil market has basically been exhausted. Judging from the indicators, there are currently signs of oil prices diverging from high levels, and it is uncertain whether they can continue to break through significantly. Therefore, investors are still advised not to blindly chase prices higher. Crude oil prices touched around US$50/barrel on Friday, reaching a recent high. Therefore, we recommend that investors with strategic bottom-hunting needs wait for a price correction before entering the market. </p
