U.S. crude oil fell slightly on Wednesday (May 6). On Tuesday, U.S. crude oil rose for six consecutive trading days. As the market’s expectations for the restart of the global economy and concerns about insufficient storage space for U.S. crude oil eased, oil prices continued to rise. Five The price of U.S. crude oil doubled during the trading day and hit a new high in nearly a month on Wednesday.
However, Texas in the United States failed to reach an agreement on cutting production by 1 million barrels per day on Tuesday. At the same time, the market is still worried about the risk of a second outbreak of the epidemic. In addition, the downward pressure on the global economy remains high. Based on this, considering the recent excessive rebound in oil prices, analysts believe that the recent continuous rise in oil prices has lost momentum and there is a risk of a correction in the short term.
U.S. crude oil imports increased by 247,000 barrels per day last week
Financial blog Zero Hedge commented on the U.S. API data for the week, saying that although the API data showed that the U.S. Crude oil inventories increased more than expected last week, and WTI crude oil futures continued to expand their gains, as oil prices have been rising in recent days due to the market becoming more optimistic about the restart of crude oil demand and Genscape reporting an increase in inventories in the Cushing area.
The spread between the June and July futures contracts of WTI crude oil narrowed to the narrowest in more than a month, indicating that market concerns about a crude oil supply glut are diminishing. Bill O’Grady, chief market strategist at Confluence Asset Management, said that the main problem is that people are less concerned about the crude oil storage crisis, and crude oil production is expected to begin to decline rapidly.
The expected increase in production will make U.S. crude oil Stockpiles expanded for a 15th consecutive week, the longest stretch since early 2015, and put stocks nearly 12% above the DOE’s five-year average.
Phil Flynn, senior market analyst at Price Futures Group, said U.S. crude inventories have surged by nearly 80 million barrels since the end of March, but the pace of increases has slowed in recent weeks. slowdown, suggesting crude production could fall faster than the EIA’s weekly forecast.
If the data is better than expected, it may further alleviate market concerns about insufficient crude oil storage space, thereby further pushing oil prices higher.
Oil prices are boosted as countries gradually lift lockdown measures
U.S. stock indexes rose on Tuesday as health care stocks climbed and many countries and U.S. states have eased restrictions imposed during the pandemic in an attempt to restart their economies. However, stocks fell sharply in late trading after Fed Vice Chairman Clarida made pessimistic remarks about the depth of the economic contraction.
But overall, optimism about economic restarting overshadowed the impact of Clarida’s pessimistic remarks, so US stocks still recorded gains even if they fell back in late trading.
“We’re starting to see some states reopen, we’re starting to see some activity come back,” said Paul Nolte, portfolio manager at Kingsview Investment Management. “We’re probably in the worst of it now and it’s going to start from now on. Gradually improving.”
The Dow Jones Industrial Average closed up 133.33 points, or 0.56%, to 23883.09 points; the S&P 500 Index rose 25.7 points, or 0.9%, to 2868.44 points; the Nasdaq Composite Index rose 98.41 points points, or 1.13%, to 8809.12 points.
European stocks closed higher on Tuesday, shrugging off uncertainty over the European Central Bank’s bond-buying plan, as a series of strong earnings reports and some countries easing coronavirus restrictions sparked some optimism. The pan-European STOXX 600 index closed about 2.2% higher. German stocks closed 2.5% higher, while Italian stocks rose 2%. Britain’s FTSE 100 index closed up 1.66%, and French stocks closed up 2.4%.
With the recent market optimism about economic restart taking hold, this will help to promote the recovery of crude oil demand and support oil prices in the short term.
Saudi Arabia’s oil exports in May are expected to fall to their lowest in nearly 10 years due to falling demand
Industry sources and analysts said, Saudi Arabia’s crude oil exports are expected to fall to about 6 million barrels per day in May, the lowest level in the past decade, and domestic refining output is also expected to decline as the epidemic hits demand.
According to the production reduction agreement reached with OPEC+, Saudi Arabia, the world’s largest oil exporter, will cut crude oil production by 23% in May and June to about 8.5 million barrels per day to support epidemic-related shutdown measures. Oil prices have been hit hard by a sharp drop in demand.
Industry sources said that Saudi Arabia’s crude oil exports in May are expected to be about 6 million barrels per day, of which about 4 million barrels per day will be sold to Asia. One source said exports to the United States are expected to be less than 600,000 barrels per day.
Falling oil production means lower production of associated natural gas, a by-product of crude oil extraction that is used as a feedstock in the petrochemical industry and to generate electricity.
Saudi Arabia has begun increasingly using natural gas to generate electricity to save crude oil for export.
But lower global oil demand means more cheap crude is available for domestic use, which could mean more oil will be consumed this summer as electricity demand soars as people start using air conditioners.
In 2019, when Saudi Arabia produced about 9.9 million barrels per day, the country consumed 550,000 barrels per day of crude oil during the summer, down from 700,000 barrels per day in previous years. But industry sources now expect consumption this year to be slightly above 2019 levels.
Saudi refineries typically process about 2.4 million barrels of crude oil per day, and they may reduce refining capacity as demand for refined products declines. Texas fails to pass 1 million barrels/day production cutrecommendations, but involuntary production cuts by U.S. shale oil plants are expected to offset the impact
Texas energy regulators said on Tuesday they would not force production cuts, ending a month-long debate after Texas Energy regulators debated whether to implement production cuts for the first time in five decades amid a historic plunge in oil prices.
Turbulent markets prompted state Railroad Commissioner Ryan Sitton last month to propose enacting production cuts after Parsley Energy and Pioneer Natural Resources asked regulators to require a 20%, or 1 million barrel per day, production cut. idea. The idea has also won favor from OPEC Secretary-General Mohammad Barkindo and Russian Energy Minister Alexander Novak.
But the idea never gained support from the other two commissioners, and the idea would need at least two votes to gain approval. And Texas energy regulators on Tuesday rejected a motion to consider proration.
Commissioner Christi Craddick said, “The industry and the market are evolving much faster than we as regulators can.”
Commissioner Chairman Wayne Christian (Wayne Christian) said other states have also not taken action to reduce additional production, which would leave Texas “on its own” if we enacted production cuts.
It is reported that large and small companies such as Chevron, Exxon Mobil and Occidental Petroleum have planned to cut hundreds of thousands of barrels of shale oil per day, far exceeding any government action.
Texas is the largest oil-producing state in the United States, producing approximately 5.4 million barrels per day of crude oil. Last year, the country’s oil production increased by 600,000 barrels per day, accounting for about 41% of the total increase in U.S. production.
Although Texas’ failure to pass an initiative to cut production by 1 million barrels per day may limit the rise in oil prices in the short term, previous market estimates showed that the decline in crude oil production in the United States due to low oil prices may reach 2 million barrels. /day. If there are more signs of an increase in involuntary U.S. production cuts, it is expected to still support oil prices.
U.S. crude oil doubled in five trading days, and there is insufficient short-term upward momentum
Analysts warned that it will double within five days. After doubling in oil prices, gains in oil prices have run out of steam, with worries about what could be a long and uncertain recovery offset by optimism that production cuts would ease a supply glut.
After rising 20% on Tuesday to close at their highest level in nearly a month, New York futures fell toward $24 a barrel during Asian trading. Diamondback Energy Inc. and Parsley Energy Inc. have become the latest drillers to cut production in the largest U.S. shale fields, but they said they would consider resuming production if oil prices rise above $30 a barrel.
OPEC+ implemented production cuts of 9.7 million barrels per day starting on May 1, easing concerns that crude oil and fuel storage space will be exhausted. Morgan Stanley believes that the oversupply may have reached its peak, but the market may remain oversupplied for several more weeks;
While the worst for the oil market may be over, most analysts believe that at least It will take a year to return to pre-pandemic consumption levels, and some even doubt that will happen. In the United States, as states reopen, the risk of a second wave of infections cannot be underestimated.
Downward pressure on the global economy remains high It is also expected to limit the space for oil prices to rebound
Although countries are gradually lifting blockade measures, there are increasing signs that the global economic recovery may be a long process.
Overnight U.S. economic data showed that the U.S. trade deficit expanded in March, exports fell by a record, and imports fell by the largest amount in 11 years. At the same time, although the U.S. non-manufacturing PMI was better than expected, overall demand and employment indicators in the service industry fell to historical lows in April, highlighting the increasing downward pressure on the economy.
In this regard, the chief economist of the OECD said that do not expect the global economy to rebound quickly. This will be a very gradual process
Several major policymakers at the Federal Reserve said on Tuesday that the United States The economy is set for its deepest recession in decades, followed by a recovery likely to begin in the second half of the year, but growth is likely to be slow and uneven. “We are experiencing the most severe contraction in economic activity and surge in unemployment in our lifetime,” said Fed Vice Chairman Clarida. “Unfortunately, unemployment is going to soar to levels we probably haven’t seen since the 1940s.” After Clarida’s speech, U.S. stocks fell sharply.
Other Fed policymakers also made pessimistic statements in their speeches on Tuesday. St. Louis Fed President Bullard believed that the main economic turmoil will occur in the second quarter. Chicago Fed President Evans said that the recent move to lift stay-at-home epidemic prevention orders in some areas of the United States is bold and comes with potentially high risks. He predicts that the U.S. unemployment rate may surge to double digits in April. </p
