Zhongyu Information In-depth Observation
During the period from May 18 to May 21, the European and American crude oil futures prices have been strengthening, and the price center is wide A substantial increase. Since the beginning of May, production cuts and economic restarts by oil-producing countries have jointly driven the recovery of the oil market. Early signals of the rebalancing path of the oil market have stimulated a wide rise in crude oil spot prices, and more market performances during this cycle have further consolidated market confidence. Europe and the United States Crude oil futures prices accelerated their recovery.
Zhongyu Information monitoring data shows that the closing price of WTI crude oil futures on the New York Mercantile Exchange on May 21, 2020 was US$33.92/barrel, an increase of US$4.49/barrel, or 15.26%, compared with last Friday. ; On May 21, the closing price of Brent crude oil futures on the Intercontinental Exchange was US$35.32/barrel, an increase of US$3.56/barrel, or 10.95%, compared with last Friday. In the four trading days from May 18 to May 21, the average closing price of WTI was US$32.93/barrel, an increase of US$6.493/barrel, or 24.56%, from last week, and the average closing price of Brent was US$35.32/barrel, an increase of US$6.493/barrel from last week. It rose by US$4.832/barrel, or 15.85%. The four-day average price difference between Brent and WTI is US$2.385/barrel, narrowed by US$1.66/barrel from last week.
During this cycle, the U.S. crude oil 06 contract successfully completed the move to another month and did not repeat the negative oil price tragedy last month, which effectively consolidated market confidence. The U.S. EIA inventory report showed that U.S. commercial crude oil inventories and crude oil inventory data in the Cushing area, the WTI delivery site, continued to record declines, which eased market expansion expectations, while U.S. strategic oil inventories further increased, which means that the U.S. storage plan is progressing smoothly. This further raised the extreme value of market inventories and diluted the downside risks of U.S. crude oil.
The supply side of the oil market continues to improve significantly, the production reduction alliance effectively implements production reductions, and other oil-producing countries provide contributions outside the framework through production reductions. Kuwait and Saudi Arabia have agreed to halt production at the Al-Khafji oil field from June 1, according to people familiar with the matter. The shutdown will reduce crude oil production by 140,000 barrels per day. Both Saudi Arabia and Kuwait said they would further increase production cuts in June based on the production quotas agreed in the production reduction agreement. In addition to the direct production decline reported by the U.S. EIA in the North American shale oil production areas, some energy companies have cut production and planned to close oil wells. It is said that the closure of oil fields in the Bakken region of the United States has affected oil production by 510,000 barrels per day. The market expects that the U.S., Canadian oil well closures and production reduction plans are far greater than current data indicate. Major oil-producing countries have also reduced oil supply quotas to major export regions due to production cuts, which provides evidence that the effectiveness of production cuts is beginning to show.
On the demand side, crude oil demand from Asia, especially China, has a supporting effect on oil prices. Large-scale crude oil cargoes in recent and far months are flocking to Chinese ports. As the world’s largest crude oil importer, , China has basically got rid of the impact of the epidemic, and oil demand is returning to pre-epidemic levels. The restart of the economy and the relaxation of blockades in India and other countries have also promoted oil demand. The expected recovery of gasoline consumption in Europe and the United States has also supported oil prices.
However, the Zhongyu Information Crude Oil Research Group believes that despite the rapid development, crude oil prices still have hidden worries. The benefits of supply-side reduction are far greater than the demand-side recovery performance. The excessive growth of oil prices lacks sustainability. In addition, the current crude oil price level is already near the lifeline of shale oil, which means that further breakthroughs will face greater resistance. Judging from the details, U.S. gasoline inventories have unexpectedly increased this cycle, which has sounded the alarm to the market, while refinery operating rates have remained low, which is not conducive to further digestion of inventories and also means that downstream demand has been slow to recover. The U.S. financial market will be closed next Monday (May 25) due to Memorial Day. For a long time, large-scale travel activities during Memorial Day have been one of the important references for reflecting U.S. oil demand. However, the market is still concerned about the current epidemic situation. The holiday travel situation is not optimistic. A small detail is that the mayor of Baltimore, Maryland asked US President Donald Trump to cancel his plan to visit the city on May 25 to commemorate Memorial Day, pointing out that the city is still implementing epidemic prevention Lockdown stay-at-home orders. The holiday effect on gasoline consumption has been weakened, and a series of data indicate that the U.S. economy is facing recession challenges, which will put heavy pressure on crude oil futures prices in the next cycle. In addition, the government work report of China’s two sessions this Friday did not mention the 2020 economic growth target, which is extremely rare. The market is worried that the Chinese government’s relaxation of the GDP growth target for the first time due to the impact of the epidemic will mean a decrease in the scale of infrastructure investment, thereby affecting oil Demand growth, this expectation will undoubtedly further suppress the market’s bullish confidence. Zhongyu predicts that European and American crude oil futures will be weakly revised downwards in the next cycle. WTI futures prices will fall to around US$30/barrel, and Brent oil prices may fall to US$33. /near the barrel. </p