With the rising market risk appetite and expectations that oil-producing countries will extend the production reduction agreement, international oil prices continued to rise this week. On the morning of June 3, the price of Brent crude oil futures rose above the US$40 per barrel mark. This was the first time in 62 trading days since the price war broke out in early March that it stood above US$40. During the same period, the price of U.S. oil futures was US$37 per barrel, up nearly 2%.
In the past May, U.S. crude oil futures and Brent crude oil futures prices recorded the strongest monthly gains in years. U.S. crude oil futures rose 85.02% that month and rose back above $30. Lrent crude oil futures rose 41.07% that month.
It is worth mentioning that since March 31st, because the price of crude oil has continued to be below 40 US dollars, we have enjoyed the “floor price” for driving and refueling. If the price of crude oil continues to rise in the future, days like this will It may be over.
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OPEC+ production cut expectations stimulate crude oil rise
According to Bloomberg, OPEC+ is considering moving its next meeting a few days forward to the 4th. A representative said that the alliance plans to discuss a short extension of the current production reduction agreement.
The representative said that OPEC+ and its allies are considering extending the current production reduction agreement by one to three months; due to the rapidly changing oil market situation, the alliance prefers short-term measures so as not to disrupt the rebalancing of the market. .
OPEC+ reached the current production reduction agreement in April due to the sharp drop in demand and plummeting oil prices caused by the new crown epidemic. The agreement calls for an easing of production cuts from July, but the matter will be discussed at the next meeting. Last week, people familiar with the matter said that Russia hopes to reduce production cuts starting in July.
The production reduction agreement and a stronger-than-expected rebound in demand pushed oil prices higher. But as the world begins to relax anti-epidemic lockdown measures, concerns about a possible second wave of the epidemic have made it more difficult to predict recovery.
If the meeting is held early, it will give the alliance of oil producers greater flexibility to adjust current production limits. OPEC member countries usually decide their shipment plans to customers in July in the first week of June, and holding the meeting in advance can give them more time to respond.
OPEC+ had previously promised to cut production by 9.7 million barrels per day in May and June, equivalent to about 10% of global supply. In addition, Saudi Arabia, Kuwait and the United Arab Emirates voluntarily cut additional production by approximately 1.2 million barrels per day in June, meaning that OPEC+’s total production reduction is approximately 11 million barrels per day. The daily production cut was originally scheduled to be reduced to about 7.7 million barrels in July.
According to CCTV News, on the evening of June 2, local time, data released by the American Petroleum Institute (API) showed that U.S. API crude oil inventories unexpectedly decreased by 483,000 barrels in the week ending May 29. The news spurred U.S. oil prices to rise as much as 4%.
The global oil market may achieve a balance between supply and demand in June
International Energy Agency Director Fatih Birol once said that he has seen signs of a gradual balance between supply and demand in the crude oil market. Russian Energy Minister Alexander Novak also recently stated that the global crude oil market will achieve a balance between supply and demand in June or July.
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However, some market participants are worried about the trend of oil prices. Jason Gammer, an analyst at Jefferies Group, an American investment bank, said that if oil-producing countries no longer cut production due to a rebound in oil prices, the current upward trend in oil prices will be at risk. Austria’s JBC Energy also believes that at current price levels, many shut-in oil wells will be put back into production.
According to the Economic Information Daily, concerns about insufficient storage space for crude oil have been significantly alleviated. Some analysts and banks predict that the global crude market could achieve supply and demand balance as early as June as lockdown measures ease, top producers cut production and demand recovers.
Domestic oil prices have been stranded for the fifth time in a row
On May 28, according to news released on the website of the National Development and Reform Commission, as of May 27, The average price of crude oil in the international market, which domestic refined oil prices are linked to in the first 10 working days, is below US$40 per barrel. According to the relevant provisions of the “Measures for the Administration of Petroleum Prices” and the “Measures for the Collection and Management of Oil Price Regulation Risk Reserves”, the prices of gasoline and diesel will not be adjusted this time, and the unadjusted amount will be included in the oil price regulation risk reserve and the full amount will be turned over to the central treasury.
According to the “Petroleum Price Management Measures” issued by the National Development and Reform Commission on January 13, 2016: “When the international market crude oil price is lower than 40 US dollars per barrel (inclusive), the crude oil price is 40 US dollars per barrel, The normal processing profit margin is used to calculate the price of refined oil.” US$40 per barrel is the so-called “floor price.”
Since this year, domestic refined oil prices have experienced 10 adjustments, 7 strandings, and 3 reductions. The prices of gasoline and diesel have been reduced by a total of 1,850 yuan/ton and 1,780 yuan/ton respectively. Among them, starting from the price adjustment window at 24:00 on March 31, domestic refined oil prices have been stranded five times in a row because crude oil prices in the international market have fallen below US$40 per barrel.
Picture source: Sino-Singapore Jingwei
It should be pointed out that the next round of domestic refined oil price adjustment window will open at 24:00 on June 11. Since the change rate refers to the average price of crude oil as the average of ten working days, if crude oil continues to improve, there is the possibility of subsequent price adjustments for domestic refined oil.
According to Sino-Singapore Jingwei, Zhuochuang Information refined oil analysis Analyst Zheng Mingya said that in the later stage, the epidemic may drag down the global crude oil demand side into a weak situation for a long time. Even if it rises due to short-term favorable factors, the extent may be limited. It is expected that in the next round of pricing cycle, the average price of crude oil may continue to be at Under the floor price of US$40/barrel, there is a high probability that the retail price limit of refined oil products will not be adjusted for the sixth time during the year at 24:00 on June 11.</p
