There is no shortage of stories in the crude oil market, especially stories about production cuts. Last night, OPEC+ reached an agreement on February oil production. Saudi Arabia will voluntarily reduce production by an additional 1 million barrels per day in February and March, Russia will increase production by 65,000 barrels per day in February and March, and Kazakhstan will increase production by 10,000 barrels per day in February and March. day. Overall, OPEC+ not only failed to increase production, but relied on Saudi Arabia’s voluntary production cuts to substantially increase production cuts. In addition, the API report showed that U.S. crude oil inventories fell by 1.663 million barrels last week to 491.3 million barrels.
Affected by this news, international oil prices rose sharply, and WTI crude oil futures once exceeded the $50 mark for the first time since February last year. As of early morning closing this morning, the U.S. S&P 500 index rose 0.71%, the European Stoxx50 index fell 0.57%, the U.S. dollar index fell 0.45%, WTI crude oil rose 5.17%, Brent crude oil rose 5.60%, London copper rose 2.48%, and gold rose 0.36%. U.S. soybeans rose 2.86%, U.S. soybean meal rose 2.24%, U.S. soybean oil rose 3.73%, U.S. sugar rose 2.09%, U.S. cotton rose 1.73%, the CRB index rose 2.58%, and the BDI index rose 3.20%.
The OPEC+ meeting reached an agreement on February oil production
On January 5, Saudi Arabia and OPEC+, represented by Russia, reached an oil production agreement in February 2021. The draft statement said that OPEC+ agreed to increase production by 75,000 barrels per day in February and March respectively as Russia and Kazakhstan increased production. Saudi Arabia will voluntarily unilaterally reduce oil production by 1 million barrels per day in February and March. Starting from February 1, Saudi Arabia’s oil production will be 8.125 million barrels per day. Except for Saudi Arabia, Russia and Kazakhstan, all OPEC+ oil-producing countries will maintain their oil production policies unchanged.
Affected by this news, U.S. crude oil prices continued to rise, with the main WTI crude oil futures contract reaching an intraday high of $50.04/barrel, the first time since February 2020. Brent crude oil prices also continued to rise, with the main contract rising to an intraday high of $53.75/barrel.
Previously, OPEC+ oil-producing countries had differences on the issue of increasing production. Some countries were worried that the new crown blockade would hit demand, and OPEC members led by Saudi Arabia wanted to maintain the existing production cuts. Agreement; while Russia and Kazakhstan said recovery in demand justified increasing production. Market analysts said that Saudi Arabia is more concerned about the fundamentals of the oil market, which has been weakening, while Russia is more concerned about regaining market share.
It is reported that OPEC+ will hold a meeting of the Ministerial Supervision Committee of OPEC and non-OPEC oil-producing countries in February and a full meeting in March. At the next OPEC+ meeting, member countries will decide on oil production policies for April.
Tensions in the Middle East have also contributed to rising oil prices. Bjornar Tonhaugen, head of oil markets at Rystad Energy, said: “Iran’s seizure of an oil tanker has once again caused instability in the region and once again questioned the reliability of maritime oil transportation in the Gulf of Mexico.”
However, it should be noted that despite OPEC+’s push to reduce production, oil prices are still below pre-epidemic levels. At the beginning of 2020, WTI crude oil was trading at more than $63 per barrel. The still-spreading epidemic always reminds the market that the road to recovery in the oil market will not be so smooth.
Eurasia Group Ayham Kamel said earlier: “If OPEC+ chooses to keep production levels unchanged in February (that is, cutting production by 7.2 million barrels per day), the next meeting may Authorization to increase production, but global economic and epidemic dynamics are still key factors affecting OPEC+’s future decisions.”
Coke is approaching the 3,000 yuan/ton mark
Black products are still the strongest player in the domestic product market. As of the afternoon close of January 5, the main iron ore contract rose by 4%, strongly leading the rise; coke rose by 3.62%, approaching the 3,000 yuan/ton mark during the session, and set a new high since its listing. Analysts believe that there are fundamental factors behind the strength of the black series. In addition to the rapid landing of the twelfth round of increases in coke spot prices due to the mismatch between supply and demand, the fall in iron ore shipments, increased procurement, and reduced inventories in the past week have also given rise to iron ore prices. Rising prices in ore added momentum.
“The reason for the continued strength is that macroeconomic favorable conditions and tight fundamentals resonate, forming strong support.” Xie Xu, chief researcher of Western Futures, said that iron ore still has a high basis. , a tight balance pattern of high supply and high demand, with high demand from steel mills still being the dominant factor. Last week, the year-on-year growth rate of steel mills’ weekly molten iron production was still at a high level of more than 7%. A slight drop in supply under high demand will cause prices to surge. Currently, both port inventories and steel mill inventories are not high, and steel mills still have supplies before the Spring Festival. Driven by warehouses, port inventories are also difficult to accumulate quickly, so steel mills’ warehouse replenishment drive will continue to support iron ore prices.
“Import losses are gradually narrowing, domestic steel mills are replenishing their inventories, and the transactions in the downstream coil plate market are stabilizing. The iron ore discount is relatively large, so there is a compensatory increase in the market.” Xinhu said Li Haoran, a black researcher at the Futures Research Institute.
It is understood that although Australia shipped more goods in late December 2020, domestic arrivals are expected to increase in mid-to-late January 2021, and domestic ports are under inventory pressure, but The steel mill’s in-plant inventory is low, and a large amount of port inventory needs to be gradually brought back to the factory to offset part of the pressure on inbound inventory. �In addition, market participants believe that the current pig iron production remains at a high year-on-year level and the high demand for iron ore is not a big problem. In the first and second quarters of this year, we need to pay attention to the actual impact on iron ore shipments after hurricanes in Australia and Brazil enter the rainy season.
“Demand in non-China regions will become key in 2021, and we need to pay close attention to the resumption of production abroad. It is expected that by the end of the first quarter of this year, iron ore stocks will reach 122 million tons, a quarter-on-quarter increase A decrease of 1.6 million tons. The acceleration of destocking will accelerate in the second quarter. By the end of the second quarter, iron ore inventory will reach 111 million tons, an overall decrease of 11 million tons. The overall supply and demand of iron ore will still be tight in the first half of 2021, and there will still be Gap. From the perspective of supply and demand, you can still buy short mines at low prices and turn them into materials. The current market profit is too low and you need to wait for opportunities.” Li Haoran said.
The above-mentioned interviewees believe that the main risk factor facing the market in the short term is the weakening of terminal demand before the Spring Festival, whether steel mills will take the initiative to reduce production and the intensity of the reduction.
It is worth noting that recently, the spot prices of coke futures have increased to varying degrees. As the 12th round of domestic coke spot price increases gradually took hold, the coke futures 2105 contract hit a new high on Tuesday, approaching the 3,000 yuan/ton mark.
Looking back at the current increase in coke spot prices, the fundamental reason is the tight supply due to the mismatch between supply and demand. According to industry insiders, the key to easing the subsequent contradiction between coke supply and demand is still the launch of new production capacity in the second half of this year.
“The coke futures price has risen sharply, mainly because the coke spot market has ushered in the 12th round of increases, and the market sentiment is relatively optimistic.” said an industry insider.
“Today some steel mills in Shandong have accepted (the 12th round of increase in coke prices). The current increase in coke prices is mainly due to the periodic dislocation of supply and demand caused by policies.” Donghai Futures researcher Liu Huifeng told a reporter from Futures Daily that this logic continues for the time being: on the one hand, both the capacity utilization rate and inventory of coking plants are declining. From October to December 2020, the net elimination of coking production capacity was 18.835 million tons; on the other hand, On the other hand, the start-up of domestic steel mills continues to be at a high level. The average daily hot metal production last week was still as high as 2.45 million tons. And as steel mills are still profitable, a sharp drop in hot metal production is unlikely.
Xie Xu believes that the fundamentals of coke are still tight, with high demand superimposed on coking and overcapacity reduction, and the time lag between the elimination of production capacity and the addition of new production capacity, resulting in a mismatch between supply and demand, and inventories remain at low levels. Destocking continues, and the drive to replenish stocks is still strong despite the low inventory of steel mills before the Spring Festival, which has strong support for coke prices. Recently, coking companies across the country have once again made a strong increase of 100 yuan/ton. At present, there are steel mills in Tangshan area that have accepted the increase. The implementation of 12 rounds of boost will definitely become a reality.
According to statistics, the total number of 4.3 coke oven coke enterprises in Luliang Xiaoyi City is 4.55 million tons. As of January 4, 2.2 million tons have been shut down, of which 700,000 tons involve heating heat. Tasks are expected to be shut down by the end of March. One 600,000-ton plant is likely to be shut down after the new plant is put into production in the near future, and the remaining one is in a wait-and-see state. Recently, affected by the centralized elimination of coking production capacity and periodic environmental protection production restrictions, the capacity utilization rate of coking companies has dropped significantly. The average daily hot metal production of blast furnaces in demand-side steel plants has increased instead of falling. The mismatch between coke supply and demand is still relatively obvious.
“The tight supply and demand pattern is difficult to change in the short term, and coke will still maintain a strong trend. Investors need to focus on the weakening of terminal demand before the Spring Festival, and steel mills are facing losses and actively reducing production. The intensity of the restriction on coke prices.” Xie Xu said. </p
