Summary
On Friday night, a news that Saudi Arabia was considering terminating its four-year oil production alliance with Russia sparked a stir The market was worried, and then Saudi Arabia came forward to refute the rumors, saying that media reports that Saudi Arabia was considering leaving OPEC were “ridiculous and nonsense.” Saudi Arabia maintained communication and dialogue with all OPEC and OPEC+ partners. The crude oil market breathed a sigh of relief, and oil prices also It recovered some of its losses from the day’s deep losses. In fact, news like this that disrupts the supply and demand situation in the crude oil market has appeared frequently in the past period. In addition, China’s epidemic data has fluctuated many times recently, and the spread of public health incidents in Japan and South Korea, ship explosions in Libya, and US sanctions on Rosneft’s subsidiaries have further hit Venezuela, etc., which have affected the trend of crude oil. The eventful “spring” has made the short-term judgment of oil prices full of uncertainty.
This week, crude oil prices have peaked and declined after experiencing a sharp rise. The $60 mark is not only an important integer mark, but also the 0.382 Fibonacci after this round of price decline. Important points. Brent oil prices began to correct after hitting a high of $60. If it cannot rise above this key position, oil prices will maintain a weak range and there is a high probability of ushering in a second bottom trend.
Although the short-term oil price rhythm and amplitude are difficult to judge due to unexpected factors, the analysis of medium and long-term oil prices is more critical. Fundamentally, we still need to focus on the development of the domestic epidemic situation and the recovery of demand. In the past week, with the liberalization of logistics and transportation, under the “strong” demand for traders and terminal replenishment, the refined oil market has experienced a lively scene of rising volume and price in several trading days, and the ex-factory price of refined oil has also been able to take advantage of this. It has risen sharply to basically close to the pre-holiday period, and the pressure on refinery inventory has eased. However, the current recovery in demand for domestic refined oil terminals is far less than expected. The epidemic situation has also made it difficult for refineries to fully resume operations. The decline in refinery operating rates has triggered a large accumulation of crude oil inventories at ports, and a large number of crude oil tankers at ports have been stranded. If the domestic demand for crude oil does not recover, the buying volume in the international market will be greatly reduced. There are reports of declining shipments in crude oil exporting places such as West Africa. Judging from the current crude oil production, there is an oversupply situation in the market. Therefore, the supply side needs Focus on the OPEC+ meeting.
The news that Saudi Arabia and Russia are about to break up is difficult for Saudi Arabia). In this case, the crude oil market can basically return to a tight balance, and crude oil prices will have the opportunity to gain upward momentum; another situation is to simply extend the production reduction agreement, The fundamentals in this case will still be in a situation of relative excess supply. When crude oil prices bottom out depends on when domestic demand recovers.
There are variables in OPEC+’s final action
During the Spring Festival holiday, the fermentation of China’s new coronavirus epidemic also affected the hearts of OPEC+. As early as a few weeks ago, OPEC+ discussed advancing the March meeting to February, and discussed the possibility of continuing to deepen production cuts during the meeting to deal with the impact of the epidemic on crude oil demand. Later, because Russia and other countries did not agree, huge internal resistance prevented the meeting from proceeding in advance, and crude oil bulls lost a good opportunity to push up.
Although the meeting failed to be held successfully in February, OPEC+ decided to renegotiate the possibility of further production cuts at the meeting in March. The “price-guaranteed faction” led by Saudi Arabia hopes that OPEC+ countries will reduce production by an additional 500,000-600,000 barrels/day on top of the existing production reduction of 1.7 million barrels/day, and extend the production reduction agreement to the end of June or December 2020. This initiative is supported by Gulf oil-producing countries such as the United Arab Emirates and Oman. However, Russia firmly opposes additional production cuts. Russia was quite reluctant at the production reduction meeting held at the end of last year. It may be difficult to continue to allow Russia to reduce production. When explaining Russia’s position, Russian Energy Minister Novak said that it takes time to assess the impact of public health security incidents in Asia on the oil market before making further decisions.
At present, there are still uncertainties about whether production cuts can be deepened at the March meeting. Although major institutions have significantly lowered global demand data, the actions in February let us see When it comes to the huge differences within OPEC+, how to resolve these differences is the first priority within it. In addition, the absolute price of crude oil will be positively correlated with the degree of divergence to a certain extent. If the Brent price remains in the range of 55-60 US dollars or even above when the meeting is held, then the resistance to deepening the production cuts will be huge, and the meeting will most likely reach a resolution to extend the production cuts without deepening them. If the price of crude oil at the time of the meetingThe industry will increase the operating rate, increase the demand for crude oil, and then increase the import volume of crude oil. Therefore, we believe that the domestic refined oil price trend will start earlier than the crude oil price. Using the refined oil crack price difference as a monitoring indicator is to judge the true strength of oil prices. an important basis.
To sum up, the current domestic COVID-19 epidemic prevention and control has entered a critical moment. Whether the resumption of work in various parts of China can be steadily advanced requires continued attention. Crude oil prices have also entered a critical moment. After being blocked at the 60-60.2 pressure level, crude oil prices will most likely experience a bottoming process. In the future, we will still focus on the development of the epidemic situation, domestic resumption of work and the OPEC+ meeting. The time when domestic crude oil demand recovers determines the time when the fundamentals of crude oil prices change. “If China is stable, the world will be stable.” Whether OPEC+ will ultimately deepen production cuts or simply extend them will determine the bottom range of crude oil prices. In the long term, we believe that crude oil prices in the first half of the year are likely to experience bottoming oscillations, and then rise as demand gradually recovers. Therefore, long orders can be appropriately placed when the price bottoms out for the second time and a bottom signal appears.
</p
