This week, international oil prices are likely to end the oscillation range, but bulls do not seem to want to seize this opportunity. Crude oil prices have always maintained range oscillations, and it is still unclear. signs of a breakthrough. This week, the price of Brent crude oil fell by 0.16%, with an amplitude of US$2.05/barrel; the price of WTI crude oil increased by 0.37%, with an amplitude of US$2.19/barrel; while SC, as international oil prices continued to trade sideways, under the pressure of increasing capital positions It took the lead to break through the July situation and closed at a new low in the month. To some extent, it reflects the current pressure on domestic crude oil supply and demand. But for the international market, it still seems more difficult to find the right direction.
This Wednesday, the January OPEC meeting was held again. At the meeting, it was decided to lower the production reduction of 9.7 million barrels per day to 7.7 million barrels per day as planned. However, due to the compensation for the production reduction , Saudi Arabia estimates that the actual scale of production cuts will be between 8.1 million and 8.2 million barrels per day, which is about 1.5 million barrels lower than before. OPEC’s reduction in production reduction limit this time is within the plan, and the market has already expected it, so the overall price change is not very big.
The EIA data released on the evening of the production reduction meeting was also quite good. U.S. crude oil inventories fell sharply by 7.5 million barrels. Crude oil prices oscillated upward, with Brent oil prices hitting a maximum of $43.85 per barrel, far from the previous high. US$43.97/barrel is just one step away. It can be said that as long as the bulls continue to exert their efforts, the price will most likely stabilize in the US$44/barrel range and have the ability to rise further above US$45/barrel.
But the next day, crude oil prices began to pull back, and the hoped-for breakthrough market once again failed, and oil prices returned to the oscillation range of 40-44 US dollars per barrel. You must know that oil prices have been oscillating in this area for a month and a half, and the market volatility has been completely flattened. The too flat volatility has also lost the opportunity for substantial capital participation.
At a time when there are no major variables in fundamentals, we find that the trends of crude oil and U.S. stocks are extremely consistent. Therefore, in addition to paying attention to changes in fundamentals, we also need to pay attention to the recent changes in U.S. stocks. The trend will determine the direction of oil prices from the macro cycle. Looking at it now, the oil price breakthrough has not yet arrived. In the future, more influential logic will still be needed to prompt the price to choose its final direction.
OPEC meeting did not change the oscillation pattern
OPEC+ meeting The results did not seem to bring many surprises to the market, and were within expectations. After crude oil prices tested the top upward that day, they fell slightly again, and there was no big trend. The OPEC+ meeting decided to lower production cuts to 7.7 million barrels per day as planned. However, due to compensation for the production reduction, the scale of production reduction in August is about 8.1-8.2 million barrels per day, a decrease of 1.5 million barrels per day from the limit.
Among them, in the compensation production reduction plan submitted by Iraq, it plans to make up for 70,000 barrels/day in July, 314,000 barrels/day in August, and 313,000 barrels/day in September. However, Judging from the actual output in June, the situation may not be so ideal. Iraq’s production reduction in June actually did not meet the standard. The implementation rate of production reduction was only 88%, and there is still a gap of 120,000 barrels/day. This means that Iraq needs to continue to reduce production by 190,000 barrels/day in July. Therefore, July’s data is very critical. The key point is whether Iraq has actually reached an agreement to reduce production and reduced production by an additional 70,000 barrels per day. If it does, then we can actually expect that Iraq will also implement a compensatory production reduction plan from August to September.
Judging from the data in June, the total production reduction of OPEC production-reducing countries was 6.807 million barrels/day, exceeding the production reduction by 723,000 barrels/day, and the implementation rate reached 112%. This The big reason is that Saudi Arabia and other countries have reduced production by more than 1 million barrels per day. If these more than 1 million barrels are removed, the implementation rate of production reduction will still be less than 100%. After June, Saudi Arabia and other countries canceled their voluntary production reduction plans, so it is certain that OPEC’s crude oil production will increase significantly in July.
OPEC’s efforts to reduce production, in addition to pushing up crude oil prices, also have an important purpose is to manage the forward curve. When prices are low and OPEC significantly cuts production, the management of the forward curve can force inventory to be cleared passively, while limiting the production of shale oil so as to prevent shale oil from changing the market supply and demand structure at the time when OPEC cuts production. , occupying the market in large quantities, so the management of the forward curve is more important than the management of absolute prices.
When crude oil prices are at a relatively high level, OPEC’s willingness to manage the forward curve will be greatly weakened. High oil prices are an undifferentiated gift to all oil-producing countries, even if they are managed by the forward curve Well, the high prices at the proximal and far ends are enough for shale oil producers to maintain value, so they will not resist the pace of shale oil production increase. In the current period of relatively low oil prices, the management of the forward curve is the most beneficial tool to suppress global production while forcing global destocking.
and Nigeria have the largest gaps, at 124,000 barrels/day and 92,000 barrels/day respectively, which are relatively acceptable. We look forward to the July data that these two countries can reach an agreement to reduce production as promised.
Same asAt this time, there is another country that deserves our close attention. According to the latest data from Baker Hughes, the number of crude oil rigs in Venezuela has dropped to only one, and its crude oil production and crude oil exports have also fallen sharply. The main raw material for domestic asphalt production is Venezuelan crude oil. Therefore, the Venezuelan market situation will affect domestic asphalt production and we need to pay close attention to it.
The U.S. market continues to recover slowly
In this week’s EIA data, the U.S. refinery operating rate continues to slowly rebound, and the current data has rebounded to 78.1 %, which is still far behind the same period in history. We have been emphasizing the U.S. market because the United States has the most frequent and most intuitive crude oil market data. The slow increase in the U.S. operating rate is ultimately closely related to the epidemic in the country.
According to the latest data, the cumulative number of confirmed cases of the epidemic in the United States has exceeded 3.7 million, and the cumulative number of deaths has exceeded 140,000. The number of newly confirmed cases on Friday reached 77,000. New highs, linear function level growth has been maintained in the month since mid-June, and there are no signs of an inflection point yet. This is more frightening. The current epidemic situation in the United States has not fully recovered. Although Trump has repeatedly asked the American people to give up their health and safety and quickly restore the economy, the effect is not very good. Coupled with the increase in working from home and the reduction in public transportation such as flights, U.S. crude oil demand has fallen sharply.
The biggest highlight in this week’s EIA data is that U.S. crude oil storage fell sharply by 7.5 million barrels, which also directly supports the rise in oil prices. From a seasonal perspective, crude oil inventories have entered a downward cycle, but due to the special nature of this year, there may not be obvious seasonality. If we break down the data, U.S. crude oil production has not changed, refining input has increased slightly, and exports have not changed much. The main change is that imports have fallen sharply. This alone contributed 12 million barrels to crude oil inventories. Decline.
U.S. refined oil inventories are also something we need to focus on. In this period’s data, gasoline inventories fell by 3.14 million barrels, and refined oil inventories fell by 453,000 barrels. Overall, they maintained a downward trend. The trend, coupled with the decline in crude oil inventories, gave the market great hope on Wednesday. But the good times did not last long. Crude oil only gave us a good expectation that day. The market thought that a market trend was about to appear, but it never expected that it would return to the oscillation range the next day. The slight benefit could no longer support the continued upward trend of oil prices.
In summary, the current crude oil price is still within the oscillation range. In the short term, we have not yet See signs of change. The longer the oscillating market lasts, the greater the possibility of a big market in the future. Therefore, you must not be paralyzed by boring market conditions and beware of large market fluctuations. It is still difficult to judge the future direction of oil prices. In the context of large-scale water releases, it is difficult for us to use traditional logic to judge the rise and fall of prices. We can pay close attention to the oscillation and breakthrough of Brent crude oil in the range of 40-44 US dollars per barrel.
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