The plunge in international oil prices last Thursday night still left people with lingering fears, causing bullish investors to cut their positions with grins. Although the plunge did not continue last Friday night, INE crude oil futures last week The price limit fell to close on Friday afternoon, and the subsequent huge fluctuations of international crude oil up and down 3 US dollars / barrel still made investors panic. The sudden amplification of volatility forced exchanges to significantly increase margins. The CME Group raised the maintenance margin for the April contract of NYMEX crude oil futures from US$4,525/lot to US$5,100/lot, an increase of 12.7%. It can be seen from the changes in U.S. oil positions that the positions were quickly reduced by more than 100,000 lots in the two trading days starting from last Thursday. This is a rapid reduction of positions that has been rare in more than half a year. Obviously, there is no shortage of liquidation stories behind this. At this moment, investors are eager to I wonder what will happen to oil prices in the future.
Judging from the performance of international oil prices, the plunge last Thursday night has interrupted the continuous rise that began in November 2020. However, it fell to key technical support Later, the situation in the Middle East heated up again. An oil refinery in Riyadh, the capital of Saudi Arabia, was attacked by a drone. The improvement in Sino-US negotiations has calmed market tensions and oil prices have gained a breather. So can oil prices effectively stop falling from this position, stabilize and continue to rise?
After the plunge, investment banks such as Goldman Sachs and UBS quickly jumped out to encourage the market. UBS predicts that the oil market will continue to be in short supply in the second half of the year, and the price of Brent crude oil will rise to US$75. /bucket. Goldman Sachs expects OPEC+ crude oil production to increase by 2.8 million barrels by August, but strong demand is still enough to keep the market in short supply. It maintains its previous assessment that Brent crude oil prices will rise from $65/barrel in March this summer. to US$80/barrel.
But in fact, investors had already begun to leave the market before the oil price plummeted. A report released by the U.S. Commodity Futures Trading Commission (CFTC) on March 19 showed that as of March 10 to In the week of March 16, the willingness to be bullish on crude oil cooled down, and speculative net long positions decreased by 11,996 contracts to 525,442 contracts, indicating that investors’ willingness to be bullish on crude oil cooled down, and the plunge on March 18 is expected to prompt more funds. Leave.
The reason investors are so cautious is due to recent market changes. Several major European economies have reimposed lockdowns as a new wave of virus infections in Europe dented expectations of an imminent recovery in fuel demand, while worries about vaccinations also limited market gains. Germany, France and other countries have announced the resumption of vaccinations with the AstraZeneca vaccine after regulators declared it safe, but the pause has made it more difficult for some groups to overcome resistance to the vaccine. Britain also announced it would have to slow down its vaccination drive next month due to supply delays.
Many investors attribute the weakening of oil prices to the IEA’s March monthly report that oil prices will not see a super cycle. In fact, the recent supply and demand aspects of the crude oil market have indeed been weak.
The IEA’s latest oil market report shows that global oil demand will increase by 5.4 million barrels per day this year to 96.4 million barrels per day, recovering about 60% of last year’s losses due to the epidemic. Although oil demand is expected to fall by 1 million barrels per day in the first quarter of this year from the lows in the fourth quarter of last year, a more favorable economic outlook will support demand growth in the second half of the year.
Oil demand in the first quarter of 2021 will be 4.8 million barrels per day lower than in 2019, and demand will increase by 5.3 million barrels per day from the first quarter to the fourth quarter of 2021. Global oil demand fell by 1.4 million barrels per day in the fourth quarter compared with 2019. Increases in oil demand in developing countries will more than offset the decline in demand in developed countries due to the energy transition.
The IEA report believes that global oil demand will not return to pre-epidemic levels before 2023. An oil supercycle is not expected as supplies remain abundant.
As the economy recovers and vaccinations roll out, global oil demand is expected to be 3.5 million barrels per day more in 2025 than in 2019. Global refinery throughput will resume growth starting in the second quarter of 2021. Global oil demand is expected to increase to 104 million barrels per day by 2026.
The supply side is not worried either. The resumption of U.S. shale oil production is significantly faster than the resumption of U.S. refineries. U.S. crude oil has been in storage for three consecutive weeks. Specific data It shows that EIA crude oil inventories in the United States increased by 2.396 million barrels in the week ending March 12, and were expected to increase by 2.7 million barrels, and the previous value increased by 13.798 million barrels; EIA refined oil inventories increased by 255,000 barrels in the week ending March 12, and were expected to decrease by 2.6 million barrels. million barrels, a decrease of 5.504 million barrels from the previous value; EIA gasoline inventories increased by 472,000 barrels in the week as of March 12, with an expected decrease of 3.5 million barrels, and a decrease of 11.869 million barrels from the previous value. This week, U.S. drilling companies added 9 active drilling rigs, the largest weekly increase since January; oil services company Baker Hughes said that there are currently 318 active drilling rigs, the most since May last year; in addition, earlier reports The large-scale export of Iranian crude oil through unofficial channels has also laid hidden dangers for the market. According to estimates by traders and analysts, Iran’s recent sales to Asia have reached nearly 1 million barrels per day. Traders said this affected sales of favored grades of Norwegian, Angola and Brazilian crude, leaving the spot market unusually thin.
The IEA monthly report shows that although crude oil inventories in OECD countries fell by 14.2 million barrels in January to 3.023 billion barrels, 63 million barrels higher than the five-year average. Inventories appear to be abundant and a large amount of spare capacity has accumulated. Although demand has improved, an oil glut persists. This is in clear contrast to the optimistic expectations of investment banks. Analysts at Bank of America pointed out that the global crude oil market will record an average supply gap of 1.3 million barrels per day throughout 2021. This situation will mean that oil prices will remain high before the end of the year. The bank pointed out that 2020 will be affected by the epidemic. , global crude oil demand plummeted by 8.7 million barrels per day. However, in 2021, global crude oil demand will rebound sharply by 6 million barrels per day. From then on, by 2023, global oil consumption will increase by an additional 3 million barrels. fastest level since the 1970s.
Obviously, investment banks’ outlook for the crude oil market from a macro perspective is significantly more optimistic than expectations from an industry perspective. This optimism is not blind. In fact, the judgment of various financial fields under the current global efforts to rescue the market and protect the economy is what investment banks are best at.
Due to the unprecedented liquidity released globally, the “epidemic bull” trend in European and American stock markets has set new historical highs. Bitcoin started from 9,000 US dollars per coin, and successively stepped on 30,000, 40,000, 50,000, and 60,000 US dollars per coin. Despite repeated extreme risk conditions of “tens of billions of liquidations” in the process, it is still difficult to Stop Bitcoin’s “mad cow” path. The money-spending has caused housing prices in the United States to rise. According to a report by the U.S. real estate brokerage Redfin, the median residential sales volume in the United States increased by 13% year-on-year in September 2020, reaching US$319,000. By November, the median housing price in the United States The number rose to US$334,000, the highest annual increase since July 2013. It is expected that US housing prices will increase by another 5.7% in 2021 based on 2020.
With the U.S. dollar falling all the way, “surging” liquidity has also pushed up commodity prices. From April 2020 to February 2021, copper, iron, and silver rose by 67%, 94%, and 82%, and the energy index rose by 172%.
The next trend of oil prices requires close attention to the interpretation of macro factors and changes in the supply and demand perspective of the crude oil market. From the perspective of crude oil fundamentals, the crude oil market is about to enter the seasonal accumulation stage due to large-scale refinery maintenance after April, and April is also a critical time point when the supply side may loosen. Judging from the results of the March meeting, Saudi Arabia believes that the decision to reduce its position by an additional 1 million barrels per day will be canceled at the April meeting, and the opportunity for the entire OPEC+ monthly production increase of 500,000 barrels will also be implemented with a high probability. Taking into account unplanned developments such as Iran and Libya , Brazil’s crude oil production are some risk points, which will bring worries to the market from the supply side. We need to pay close attention to the interpretation of the final supply and demand situation in the crude oil market. Optimistic expectations at the macro level may dominate everything from a higher dimension. Therefore, even if there is pressure on the supply side, as long as the flooding liquidity and the global economic recovery continue to be strong, the oil price is still likely to be driven by macro factors. In terms of pricing, the target prices set by investment banks are not out of reach.
However, we still have to look at the mid- to long-term oil price performance more rationally. From the actions of investors who have just significantly reduced their positions, we can see that the early bullish views have begun to be revised, and the possibility that oil prices will resume their rise in the short term is relatively small. What needs to be faced next is: should the adjustment market that has already unfolded choose to release the adjustment pressure by oscillating at a high level and with a wide range, or should it fall below the current support and embark on a larger-level correction. </p
