International oil prices rose, reversing the 1% decline in the previous trading day. Oil prices had ended lower for five consecutive trading days. Oil prices were supported by higher stock markets as oil-producing countries considered further production cuts in response to a possible decline in global oil demand caused by the rapid spread of the pneumonia epidemic in China.
The OPEC+ Committee met on Tuesday to weigh the impact of the new coronavirus epidemic on global oil demand and economic growth, and listened to a speech by Wang Qun, China’s Ambassador Extraordinary and Plenipotentiary to the United Nations in Vienna, to discuss responses measure. Oil-producing countries are considering whether to increase production cuts and whether to advance the March policy meeting to February.
A report from Moody’s Analytics on Wednesday pointed out that at these prices, commodity producers will soon begin to reduce production and investment. Given the economic damage caused by the epidemic, the prospects for oil prices to recover soon are not good.
Stock markets rise, boosting oil prices
The Nasdaq index of the U.S. stock market hit a record high on Tuesday, and the S&P The 500 index posted its biggest one-day gain in about six months as concerns about a severe economic hit from the coronavirus outbreak receded after China’s central bank intervened.
The Dow Jones Industrial Average posted its biggest one-day gain in more than five months as stocks rebounded from sharp losses the previous week. The Dow Jones Industrial Average rose 407.82 points, or 1.44%, to 28,807.63 points; the S&P 500 rose 48.67 points, or 1.5%, to 3,297.59 points; the Nasdaq Composite rose 194.57 points, or 2.1%, to 9,467.97 points.
European stocks posted their biggest one-day gains in nearly four months as BP and Glencore released upbeat earnings reports and China’s measures to support the market boosted sentiment. The pan-European STOXX 600 index extended Monday’s gains and closed 1.6% higher after virus concerns sent the index down 3% last week. Britain’s FTSE 100 index rose 1.55%, the German DAX index rose 1.81%, and the French CAC-40 index closed up 1.76%.
Affected by European and American stock markets, the three major A-share stock indexes all rose. The Shanghai Composite Index rose by more than 2%, the ChiNext Index rose by 4.4%, and the Shenzhen Stock Exchange Component Index rose by 3.5%.
Investors need to note that oil price trends are often directly proportional to the stock market. A higher stock market will improve investors’ outlook for energy demand, thus boosting oil prices.
API crude oil inventories exceed expectations Increase, pay attention to the evening EIA
In the early hours of Wednesday morning, data released by the American Petroleum Institute (API) showed that U.S. API crude oil inventories increased by 4.182 million barrels more than expected in the week ended January 31. An increase of 3 million barrels is expected; gasoline inventories increase by 1.963 million barrels; refined oil inventories decrease by 1.783 million barrels. After the data was released, U.S. oil prices fell rapidly in the short term.
Oil prices fell to a one-year low, with WTI back below $50 for the first time since January 2019, as global demand concerns overwhelm OPEC+’s rhetoric, saying it can Take measures to slow down the decline in oil prices.
It is worth noting that crude oil inventories unexpectedly increased in the previous week, and this API report stated that the increase in crude oil inventories was even greater. Exceeded expectations. Commodity Research Group said investors will keep a close eye on refinery utilization; refineries are starting maintenance, which is why inventories are building.
OPEC+ considers whether to increase production cuts
The OPEC+ committee will meet on Tuesday The meeting weighed the impact of the new coronavirus epidemic on global oil demand and economic growth, and listened to the speech of Wang Qun, China’s Ambassador Extraordinary and Plenipotentiary to the United Nations in Vienna, to discuss response measures. An OPEC source said Wang Qun was speaking at a Joint Technical Committee (JTC) meeting. The JTC’s role is to provide advice to OPEC and its allies, led by Russia.
Oil prices have fallen by more than $11 this year and hit $55 a barrel, below the level needed by many OPEC countries to balance their budgets. Oil-producing countries are considering whether to increase production cuts and whether to advance the March policy meeting to February.
An OPEC source said that if Saudi Arabia and Russia agree to increase production cuts, the meeting may be brought forward. Another OPEC source also said the policy meeting could be held earlier than March.
Other OPEC+ sources and an industry insider familiar with the situation said on Monday that OPEC+ was considering further cutting production by 500,000 barrels per day due to the impact of the new coronavirus epidemic on oil demand.
The Technical Committee began to hold a special meeting in Vienna to study different scenarios such as whether to further reduce production or extend the implementation period of the current production reduction agreement. Another OPEC+ source said the committee will continue to meet on Wednesday and use the SARS epidemic as an example to assess the potential impact of the new coronavirus epidemic on demand.
Saudi Arabia is the Arab world’s largest economy, and despite diversification efforts, its revenue remains dominated by the oil industry. The country needs oil prices at around $80 to balance its national budget.
Iraq is OPEC’s second-largest oil producer. Asim Jihad, spokesman for the country’s oil ministry, said on Tuesday that the country supports any agreement that can stabilize the market. Then� Russian Energy Minister Novak said on Tuesday that he was not sure whether it was time to increase crude oil production restrictions.
OPEC+ has been reducing oil supply to support oil prices. In December, it agreed to cut production by 1.7 million barrels per day by the end of March. The next meeting was originally scheduled for March 5-6. The partners are also discussing extending production cuts, with news last week that the alliance wanted to extend them until at least June.
Alert to demand concerns that continue to put pressure on oil prices
Oil prices fell more than 1% on Tuesday 1% as concerns over the long-term hit to energy demand from the growing public health crisis outweighed hopes for further production cuts by OPEC and its allies. Gene McGillian, vice president of market research at Tradition Energy, said concerns about demand destruction really continue to choke the market.
Oil prices rose in early trading on hopes that OPEC+ would further cut production. An OPEC+ committee weighed the impact of the coronavirus on global crude demand and economic growth at a meeting, hearing from China’s ambassador to the United Nations in Vienna and discussing how to respond.
People familiar with the matter said that OPEC+ is considering cutting crude oil production by another 500,000 barrels per day. Russian Energy Minister Novak said on Tuesday that he was not sure whether it was time to increase crude oil production curbs; the news curbed the rise in oil prices.
British Petroleum Chief Financial Officer Brian Gilvary said that the economic impact of public health events will reduce crude oil consumption by 300,000-500,000 barrels per day throughout the year, which is approximately equivalent to 0.5% of global demand.
Goldman Sachs said in a report that the impact on demand could exacerbate spot price volatility. At current oil price levels, we expect both OPEC and shale producers to respond with supply, while China may seek to increase crude oil inventories.
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