“Saudi Arabia’s actual implementation of an additional 1 million barrels per day production cut” starting in February is expected to give a new impetus to the rise in crude oil prices in the short term. Although there is macroeconomic release, fundamental supply is tight, and demand is improving in the long term, the center of gravity of crude oil prices will rise further. However, the progress of negotiations on the U.S. fiscal stimulus plan, the U.S. policy attitude toward Iran, and market concerns about energy demand will also affect the direction and extent of oil price fluctuations.
01 The weekly average price of WTI fell slightly last week
According to data from the New York Mercantile Exchange, last week (2021 From January 25 to January 29), the average price of WTI crude oil futures was US$52.55/barrel, a month-on-month decrease of 0.7%.
On a total of five trading days last week, oil price fluctuations were less than $1/barrel. The main factor supporting the rise in oil prices is “the sudden drop in U.S. crude oil inventories by nearly 10 million barrels”, and the main factor that hits oil prices is “the demand for crude oil is expected to remain weak.”
Under the influence of these two factors, the price of WTI crude oil finally fell slightly.
Figure 1 WTI crude oil price changes
02 Analysis of events affecting recent oil price fluctuations
Us The impact of events on oil prices is divided into four stages: fermentation period, outbreak period, maturity period, and decline period. At present, the news that “the United States is expected to have a larger fiscal stimulus plan” is in the fermentation stage, and the news that “the market is increasingly worried about energy demand” is still in the outbreak stage. “Rising crude oil inventories” is still in the “explosion phase”, while “crude oil inventories falling” news is already in the recession phase.
Table 1 Summary of major news events affecting WTI crude oil prices within ten trading days
As shown in the previous article “How much impact will Biden’s “three things to do as new official” have on oil prices? “As expected, at a time when the epidemic situation is not optimistic and the demand for crude oil has not yet improved, the news of “increased market concerns about energy demand” is in the “outbreak period” and will still have a continued impact on the market. Last week, in the absence of clearer news guidance, the market atmosphere was pessimistic, and the news that “global oil demand remains weak” continued to suppress oil prices. Although the vaccine has been launched, there are still problems with vaccine production capacity, distribution and transportation. At the same time, there are doubts about the effectiveness of the vaccine against new mutated strains. These two points have affected the speed of the recovery of crude oil demand, causing the market to express concerns about the improvement in crude oil demand in the first quarter. .
At the same time, as mentioned before, the impact of the news of “declining crude oil inventories” on oil prices has entered a “recession period.” Last week, U.S. crude oil commercial inventory data dropped sharply by 9.91 million barrels per day, which only triggered a slight rebound in oil prices by $0.24 per barrel. The previous increase in U.S. crude oil commercial inventories by 4.35 million barrels per day caused oil prices to fall by US$0.86 per barrel. Compared with news of inventory decline, “news of increase in U.S. crude oil commercial inventories” can trigger greater oil price fluctuations. On the other hand, the market believes that as demand for crude oil improves, crude oil inventory declines are an inevitable trend, and the news of “decline in U.S. crude oil commercial inventories” will have less and less impact on oil prices.
In general, the news of “crude oil inventory decline”, which has entered the recession period last week, only caused a slight recovery in oil prices. In the absence of other news guidance, market pessimism “worried about weak crude oil demand” continued to suppress oil prices, ultimately leading to a slight decline in the average weekly crude oil price last week.
Figure 2 Weekly average price changes of WTI crude oil
Table 2 Summary of major news events affecting WTI crude oil prices in the past month
Deduction of the impact of future focus events in 03
As shown in Table 3, it is expected that in the next period of time, “whether the United States can introduce more News of a “large-scale fiscal stimulus plan”, “Saudi Arabia’s additional reduction of 1 million barrels of daily production”, “U.S. attitude towards Iran” and “increased market concerns about energy demand” will continue to affect oil prices.
Table 3 Deduction of recent key events that may affect oil prices
Compared with the beginning of January, crude oil prices have shown signs of slowing down in their upward momentum in the last two weeks of January. However, “Saudi Arabia’s actual implementation of an additional 1 million barrels per day of production cuts” starting in February is expected to give crude oil prices a new impetus in the short term.
Since OPEC+ reached a production reduction resolution in April 2020, OPEC and non-OPEC countries have reduced production by a total of 2.1 billion barrels, stabilizing the oil market and accelerating the recovery of the global crude oil market. Balance process. At the OPEC+ meeting on February 4, OPEC+ oil-producing countries continued to promise to regain oil production.The supply and demand balance of �. Affected by this, international crude oil prices, which have reached a one-year high, continue to rise. In the short term, the economic outlook and oil demand in the coming months remain uncertain, and oil prices may face a certain degree of correction risk. However, in the medium to long term, with the gradual rollout of vaccines around the world, the global economy and oil demand will gradually recover. Against the background of tightening crude oil supply, improving demand and the launch of the US fiscal stimulus plan, crude oil prices will still be in an upward channel. .
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