This week, ICE Brent crude oil rose more than 2.8%, and NYMEX crude oil hit a new high of $64.09 per barrel since April 30, 2019. U.S. air strikes that killed key military personnel in Iran and Iraq have raised concerns that escalating tensions in the Middle East could disrupt oil supplies and further strengthened trade optimism.
However, although the U.S. EIA crude oil inventory fell the most since June, it was due to a surge in exports, which will eat into the market share of the Organization of the Petroleum Exporting Countries (OPEC) and harm OPEC. The production cuts achieved to prevent a collapse in oil prices have in turn limited the rise in oil prices.
The United States “reimburses” senior Iranian military officers
Qassem Soleimani, the leader of Iran’s elite Quds Force, and Iraqi militia commander Abu Mahdi al-Muhandis were killed in an airstrike on their convoy at Baghdad Airport on Thursday (January 2). U.S. Defense Secretary Mark Esper earlier warned that there were signs that Iran or its-backed forces may be planning more attacks.
The U.S. military carried out air strikes against the Kataib Hezbollah militia in Iraq and Syria last weekend. Supporters of an Iranian-backed paramilitary group in Iraq broke into the reception area of the U.S. embassy and hurled rocks inside until the U.S. sent in additional troops and threatened retaliation against Tehran, prompting crowds to evacuate on Wednesday, ending two days of protests. Activity.
Edward Moya, an analyst at brokerage OANDA, wrote in an email: “Supply risks in the Middle East are still high, and we may see a close relationship between the United States and Iraq. Tensions among Iranian militia groups continue to escalate.”
Iraq is the second largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC), exporting approximately 3.4 million barrels per day, most of which is exported through the southern port of Basra. Turkey’s parliament has overwhelmingly passed a bill allowing the deployment of troops in Libya, paving the way for further military cooperation between Ankara and Tripoli.
John Kilduff, a partner at Again Capital, said: “I think everyone is aware of what is happening in Iraq and Libya in the Middle East.”
Trade optimism boosts commodity demand outlook
There is growing optimism that the trade war between the world’s two largest economies A trade truce will support energy demand, which also boosted oil prices. U.S. President Trump said that he looks forward to signing the first phase of the economic and trade agreement with China before January 15.
Jim Ritterbusch, president of trade consulting firm Ritterbusch and Associates, said in a report: “Optimism about U.S.-China trade continues to stimulate interest in higher-risk assets such as oil, other industrial commodities and stocks. demand.”
Looking forward to 2020, analysts expect that Brent oil prices may hover around US$63 per barrel, thanks to the Organization of the Petroleum Exporting Countries (OPEC) and its allies Further production cuts and market expectations that the Sino-US trade deal will activate economic growth.
U.S. oil production growth has been declining, with oil producers reducing the number of operating oil rigs for the fourth consecutive quarter, the first time since 1999. The International Energy Agency (IEA) predicts that U.S. oil production growth will drop to 1.1 million barrels per day in 2020 from 1.6 million barrels per day this year.
U.S. crude oil inventories drop the most since June as exports surge
The U.S. Energy Information Administration (EIA) Data released last week showed that U.S. crude oil inventories fell the most since June last week, as U.S. crude oil exports surged to more than 4 million barrels per day, a record high.
EIA announced that in the week ended December 27, U.S. crude oil inventories fell by 11.463 million barrels to 429.9 million barrels, while market estimates were for a decrease of 3.27 million barrels. Inventories at Cushing, the U.S. crude oil delivery hub, fell to their lowest level since November 2018.
The sharp decline in crude oil inventories is partly due to increased refining production, which has led to rising distillate and gasoline inventories, while imports have fallen sharply and exports have increased.
EIA data shows that in the week ending December 27, U.S. crude oil exports rose to 4.46 million barrels per day, a record high; U.S. net crude oil imports decreased by 1.52 million barrels per day, It recorded the largest decline since November 2018. Net imports fell to 1.89 million barrels per day, the lowest on record.
U.S. oil transport capacity increased last year with the opening of three major new pipelines from the Permian Basin to the Gulf Coast. The expansion of marine terminals in Corpus Christi, Texas, also boosts export capabilities.
This upends the world’s oil supply, which not only threatens to eat into the market share of the Organization of the Petroleum Exporting Countries (OPEC), which has restricted oil supply to prevent oil prices from collapsing.
Harry Tchilinguirian, global oil strategist at BNP Paribas, said: “Although OPEC and its non-OPEC partners are committed to the first oil production in 2020,Further production cuts are expected in the quarter, but we do not believe this will be enough to avoid large-scale global inventories. We still believe that there are still downside risks to crude oil fundamentals. ”
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