Introduction: The current oil price does not require short selling at all. The imbalance between supply and demand is enough to force oil prices back step by step. Since 2017, the production reduction measures implemented by OPEC+ energy producers led by Saudi Arabia have only postponed the problem of crude oil supply and demand imbalance…
Although oil prices have been range-bound throughout August, in September, oil prices continued to fall due to market concerns that the recurrence of the new crown epidemic would suppress energy demand.
Before the OPEC+ meeting in September, there were market rumors that OPEC members may increase production. This news further suppressed oil prices. .
In response, Saudi Energy Minister Prince Abdulaziz bin Salman blasted these companies for failing to complete joint production cuts. The OPEC+ oil-producing countries that are the target of the agreement, “There have been many times in the past that some countries have used tricks to try to overproduce oil and conceal their actions that did not follow the agreement, but in the end they always ended in failure. This kind of people who think they are smarter than the market Trying will not succeed, but will backfire.”
Salman said that for those who have not been able to For countries that have reached their agreed production reduction targets, OPEC+ will allow them to meet their production reduction targets before the end of this year, instead of having to meet the production reduction limits within this month. This means compensatory production cuts will last longer.
Saudi Arabia’s threats are not only aimed at OPEC+ members, but also investors shorting crude oil – “Don’t bet on OPEC+’s future determination to stabilize the oil market.”
If we look at last week’s CFTC crude oil position report, we can find that the crude oil market is not dominated by shorts. , more of a liquidation for the bulls. Every time bulls try to buy the dip, a drop in oil prices forces them to liquidate their positions, pushing prices even lower. There is no need to take a short position at this stage.
Saudi Arabia, or OPEC+ members, must realize that restrictions such as travel bans have kept energy demand far from returning to normal pre-COVID-19 levels. The sluggish demand is also affecting inventories, as can be seen in inventory levels of crude oil products such as gasoline.
Since 2017, the production reduction measures implemented by energy producing countries have only postponed the problem of crude oil supply and demand imbalance, because Once oil prices rise, all the suppressed production capacity will return to the market again, suppressing prices. The only way to keep oil prices rising is to permanently shut down excess production capacity, but this is a controversial political issue.
In addition, whenever the price of WTI crude oil exceeds 45 US dollars per barrel, US shale oil producers are also eager to give it a try.
Even in a bear market, oil prices will rebound. It is just a matter of timing, or supply and demand. It’s easy to list all the factors that affect prices going up and down, but measuring the balance of supply and demand, especially during the COVID-19 pandemic, is extremely difficult. </p
