This week, crude oil prices took advantage of China’s “May Day” holiday and surged upward, with Brent The price of crude oil was only 0.05 US dollars/barrel away from reaching 70 US dollars/barrel. Although it failed to effectively break through in the end, the price increase this week was still considerable. Under this optimistic situation, the market once again heard the voice that the price of crude oil will rise to 100 US dollars per barrel. The last time this voice appeared was when the oil price exceeded 70 US dollars per barrel two months ago.
This time there are not only market expectations, but also traders who have invested real money in it. The oil price is in a bullish pattern of $100/barrel. Traders have now bought options on nearly 20 million barrels of crude oil at $100 a barrel in three key months, with open interest nearly doubling in the past week as the world is in the midst of a commodities boom. . While a return to triple digits is not the market consensus, it is a reminder that few expect crude’s price gains to subside anytime soon.
On Monday, 4,600 lots of December Brent crude oil options with a strike price of $100/barrel were traded, more than any other option on that crude. There were other $100/barrel call trades on Wednesday, a strategy that included buying $90/barrel calls and selling $100/barrel calls. The most-held call options over the next 12 months are $75/barrel and $80/barrel options, according to data compiled by Bloomberg.
The renewed call for $100/barrel is a major manifestation of market optimism, regardless of whether oil prices will return to $100/barrel at some point in the future. barrel, whether short-term oil prices can effectively break through 70 US dollars/barrel is still unknown. Although oil prices performed well during the holidays, there was clearly a lack of stamina after the holidays. And judging from the performance of the monthly difference, the monthly difference has not effectively followed when prices rise. When the current demand side has not yet fully recovered, and when the epidemic in India continues to rage, OPEC+ will increase supply by 1.3 million barrels per day this month. , which will make crude oil prices in May more confusing.
OPEC+ begins to increase production
this Starting from March, the one-year epic production reduction project will gradually begin to increase production. From May to July, OPEC+ will gradually increase production capacity by 2 million barrels per day. Compared with OPEC’s production in March, production will increase in May. 1.37 million barrels per day, with an increase of 270,000 barrels per day in June and an increase of 360,000 barrels per day in July. Most of the increase will be in May, which includes the 1 million barrels of Saudi Arabia’s voluntary production reduction. Restore production capacity. According to the current views of various investment banks, most investment banks believe that OPEC’s increase in production is a passive increase driven by demand. Even if it increases production, the crude oil market will still maintain a relatively tight supply.
But the problem now is that under the severe epidemic situation in India, the market has lowered India’s crude oil demand by 500,000 barrels per day. The growth in production and India’s demand The decline has released a demand gap of nearly 1.8 million barrels per day. It is still unknown whether the market can fully bear this 1.8 million barrels per day variable in May. It is currently reported that due to the severe epidemic in India, although some refineries still maintain high operating conditions, there are already signs of reducing procurement as operators and market purchasers are experiencing the intrusion of the new crown epidemic, and there are more than 300,000 people in India. The high diagnosis rate has lasted for 15 days, and the number of newly confirmed cases in a single day has exceeded 400,000. If this situation continues, it will be difficult to be optimistic about India’s crude oil demand in June.
So regarding the fundamentals in May, the market has begun to show a certain degree of entanglement around US$70/barrel, without substantial data support. In this situation, it will be difficult to push crude oil prices to a new height just by relying on expected storytelling, unless bulls create some uncontrollable bullish factors at this time.
We can also see from the performance of the recent monthly difference that although the recent absolute price performance has been relatively strong, the monthly difference does not reflect the trend of the spot market. Tight, especially when the price touched the $70/barrel mark, the monthly difference fell. This in itself can also reflect that the current bulls have a slight lack of stamina, and it is only through the expected pull that promotes the superficial strength of the crude oil market.
Demand is not optimistic
From From the perspective of the epidemic, the current development of the epidemic is still worrying, and this will not provide any bullish effect on the market. From a data point of view, as of May 6, there were 850,000 new confirmed cases in a single day in the world, and a total of 155 million confirmed cases; 519,000 new confirmed cases in a single day in Asia, of which India has It exceeds 400,000 people per day. Therefore, in May-June, it seems difficult for us to have certain expectations for the recovery of crude oil demand in India.
Judging from the vaccination situation, except for the relatively impressive speed of vaccination in China, vaccination in other parts of the world is not very satisfactory. Currently, 18 million doses of vaccines are administered globally in a single day, of which��China administered 6.53 million doses of vaccine in a single day, accounting for one-third of the world’s total. The United States administered 2.13 million doses in a single day, India administered 1.84 million doses in a single day, and other countries administered less than 1 million doses. Judging from the speed of vaccination, there has been a significant slowdown in vaccination recently. Some vaccines have been suspended due to various problems, especially in the United States and India. Compared with the peak, the recent vaccination speed has reached 1 million doses/ The decline in days is enough to show the tension of the vaccine.
From a technical point of view, the current crude oil price has returned to the pressure range again, with Brent crude oil approaching the important resistance range of $70/barrel. The last time oil prices were close to this range was two months ago. Before that, oil prices had failed to break through this range twice. In addition to the previous high and integer mark pressure, the top pressure line since 2014 also extends to the current price. The price has never effectively broken through this pressure line in 7 years. Therefore, from a technical point of view, oil prices near US$70/barrel are under great pressure. If oil prices are difficult to achieve in the short term, a short-term double-top structure will be formed, and oil prices will continue to oscillate between 60 and 70 US dollars per barrel; if the Iran lifting of the embargo is relatively smooth, then the possibility of oil prices falling below the 60 US dollars per barrel range cannot be ruled out; if If oil prices can break through this resistance level in one go, then for oil prices, demand expectations will still support prices to continue to rise, and it is not impossible for oil prices to reach 80 US dollars per barrel while oscillating forward. Therefore, how oil prices perform in the short term depends on the determination of bulls! (Author’s unit: Haitong Futures)