Last week there was market news that the Biden administration was considering reducing the task of blending fuel oil in refineries. Agricultural products such as U.S. soybean oil fell sharply. At the same time, the price difference between WTI crude oil and Brent crude oil shrank to less than 2 US dollars per barrel. In the end, Brent crude oil rose by 1.1% last week, WTI crude oil rose by 2%, and SC crude oil rose by 1.86%.
Oil price performance has a certain relationship with the relatively confusing factors affecting the recent crude oil market. On the one hand, the three major monthly reports released last week were all optimistic about the supply and demand outlook for the crude oil market. At the macro level, the US CPI data exceeded expectations and once caused market disagreements. However, in the end, the market still reached a more optimistic view, and the economic stimulus in Europe and the United States continued unabated. According to a Reuters survey, more than half of people believe that the Federal Reserve may announce a reduction in its large-scale bond purchase program in August or September, but it is not expected to start reducing the scale of monthly purchases until early next year.
The three major crude oil monthly reports have optimistic outlook
OPEC’s demand for crude oil The outlook is optimistic, with OPEC saying oil demand will grow by 6.6% this year, or 5.95 million barrels per day. The forecast remained unchanged for the second consecutive month, saying, “Overall, a rebound in global economic growth, and the resulting recovery in oil demand, is expected to gain momentum in the second half of the year.”
OPEC said in its monthly report: “The global economic recovery has been delayed due to another surge in COVID-19 cases and the reimposition of blockades in major economies such as the euro zone, Japan and India.” OPEC expects global economic growth in 2021 to be 5.5%, with Last month’s forecast was unchanged and assumed the impact of the outbreak would be “largely contained” by the start of the second half. OPEC expects the United States to make the largest contribution to demand growth in 2021, with demand in OECD industrialized countries not fully recovering after a sharp decline in 2020.
The International Energy Agency (IEA) released a monthly report on June 11, stating that OPEC+, an alliance of oil-producing countries, will have to increase production and oil demand will return to pre-COVID-19 levels by the end of 2022. The IEA said that OPEC+ must open the oil floodgates to maintain sufficient supply in the global oil market. The emission reduction commitments proposed by various countries have not yet received short-term policy support, and oil demand will continue to rise.
In its short-term energy outlook report, the U.S. Energy Information Administration (EIA) estimates that U.S. crude oil production in 2021 will be 11.08 million barrels/day, compared with the previous forecast of 11.02 million barrels/day; U.S. crude oil production in 2021 Production will decrease by 230,000 barrels per day, which was previously expected to decrease by 290,000 barrels per day; U.S. crude oil production is expected to increase by 710,000 barrels per day in 2022, which was previously expected to increase by 820,000 barrels per day; U.S. crude oil demand is expected to increase in 2021 The price is 1.49 million barrels per day, compared with 1.39 million barrels per day before; WTI crude oil price is expected to be US$61.85 per barrel in 2021, compared with the previous expectation of US$58.91 per barrel; Brent crude oil price is expected to be US$65.19 per barrel in 2021, The previous forecast was $62.26/barrel. It can be seen that the EIA has significantly raised its expectations for oil prices, basically raising its annual oil price focus by US$3/barrel, and believes that based on current forecasts, US crude oil prices will remain above US$60/barrel in 2021.
It can be seen from the latest statistics of the three major monthly reports that the current crude oil market maintains tight supply and demand and a strong demand outlook for the second half of the year. Since the outbreak of the epidemic last year, U.S. shale oil drilling activities have been greatly impacted. Currently, they are also restricted by the “green energy” new policy of the U.S. Biden administration. The recovery of production capacity has been slower than the market’s previous expectations. This also means that OPEC+ has regained control of global oil. market pricing dominance. If OPEC+ remains cautious on restoring production capacity in the second half of this year, there is still room for further upside in crude oil prices.
What is the impact of the return of Iranian crude oil?
As of the end of May, Iran’s crude oil production was 2.4 million barrels per day, and its normal production was 4 million barrels per day. There is still a lot of room for recovery. The return of Iranian crude oil is almost certain, and everyone believes that Iranian crude oil is the biggest negative factor on the supply side at the moment. On June 11, news came out in the market that the United States had lifted sanctions on Iranian oil officials, and oil prices suddenly plunged. Apparently, the market understood this as a precursor to the return of Iranian crude oil. However, after 5 minutes of sharp decline, oil prices began to bottom out. In addition to the reactionary actions, funds did not continue to suppress short sales. Oil prices recovered most of the decline half an hour later. Later, U.S. officials clarified that the actions of the Treasury Department were routine and had nothing to do with Iran. Negotiations on the nuclear deal have nothing to do with it. The current market reaction to Iran’s negative news is rapid, but the lethality of the negative news will change after the stress reaction, because the market still believes that strong demand and the efforts of OPEC+ will digest the impact of the return of Iranian crude oil.
Iranian negotiator Araqchi said in the early morning of the 13th that at least one more round of negotiations was needed. During the Vienna talks, it is unlikely that terms for resuming the Iran nuclear agreement will be reached this week, which means that there will be no results until the change of Iranian president. U.S. Secretary of State Blinken said earlier that even if the United States and Iran reach a nuclear agreement, the United States will not be able to reach Tehran Hundreds of sanctions will continue to be implemented, which makes the market realize that the United States and Iran will not reach an agreement so quickly, alleviating concerns about a surge in supply.
Goldman Sachs’s view Worth reference: Slow progress in negotiations on the Iran nuclear deal may also put pressure on oil supplies, thereby supporting oil prices. “We are comforted by recent headlines in major media, and we do not expect a recovery in Iranian oil exports to occur until the autumn. Although there is excess capacity in upstream OPEC+ oil-producing countries and downstream refining capacity, we expect the scale of OPEC+’s increase in supply to lag behind the scale of the demand rebound. “Goldman Sachs said.
As the epidemic is again under control, the number of new confirmed diagnoses worldwide has dropped from a peak of 800,000 in early May to 350,000. The rate of COVID-19 vaccination has increased, and the global economy has grown. , further recovery in crude oil demand is the general trend, and we expect that oil prices will most likely remain high in the third quarter.</p