The settlement price of crude oil futures fell to a one-month low last Friday as the United States and Iran were on the verge of a full-scale conflict. Oil prices rose sharply and then fell sharply, ultimately recording a weekly decline of more than 6%.
Eurasia Group analysts Robert Johnston and Henning Gloystein said in a report that although the threat of a full-scale war has been lifted, the industry is still uneasy and worried about the possibility of a shipping accident or oil facility attack that disrupted supply last year. Attacks etc.
In addition, U.S. crude oil inventories increased by 1.16 million barrels last week, while analysts and traders had expected Inventories will fall. Gasoline inventories reached their highest level in 10 months, easing supply concerns in the world’s largest economy. In addition to sufficient supply from the United States, OPEC members have a large amount of idle production capacity after three years of production cuts.
On the whole, tensions have not affected crude oil production in the Middle East. Competition between OPEC+ and non-OPEC oil-producing countries has intensified. The supply and demand situation in the crude oil market in 2020 will still be oversupply, and the outlook for oil prices is not optimistic. In terms of data, this week’s crude oil time will usher in the three major monthly crude oil market reports of EIA, IEA, and OPEC.
Tensions have not affected Middle East crude production, explaining the drop in oil prices
Although tensions between the United States and Iran have intensified, the Middle East There appear to be no signs of disruption to crude oil production. OPEC Secretary-General Barkindo said last Wednesday (January 8) that Iraq’s oil facilities are safe and Iraq’s oil production continues.
Barkindo said on the sidelines of a conference in Abu Dhabi, “It is a relief that these facilities in Iraq continue to be safe and sound, and production is continuing efficiently, despite the current tense situation. He is still optimistic that Iraq will implement 100% of the OPEC production reduction agreement in a timely manner.”
UAE Energy Minister Mazrouei said on Wednesday that after Iran attacked the US military base in Iraq, it passed through Hormuz There was no immediate risk to oil shipments in the strait. The Strait of Hormuz is an important gateway for the oil industry.
Mazrouei said on the sidelines of a meeting in Abu Dhabi that what happened should not be exaggerated and that the current situation is not a war. Mazrouei added that OPEC was not discussing any measures at the moment, but if there was a shortage of oil supplies, OPEC would evaluate the situation.
Geopolitical influence has become another factor affecting oil prices. However, the UAE is not worried about the supply or demand for crude oil. A war in the Gulf is the last thing it wants to see.
Although the flow of oil from the Middle East remains unimpeded for now, the risk of disruption is affecting the crude oil market. Most exports from the Gulf, including those from Saudi Arabia, Iran and Iraq, pass through the Strait of Hormuz. Iran has repeatedly threatened to block the strait in the event of war.
Competition between OPEC+ and non-OPEC oil-producing countries intensifies, and attention will be paid to whether the March meeting will expand production cuts
Although OPEC’s significant production cuts have effectively supported oil prices, competition between OPEC and non-OPEC oil-producing countries has intensified in 2020.
The potential OPEC+ production cut in the first quarter of 2020 is 2.1 million barrels per day. However, according to the three major agencies, the output growth of non-OPEC oil-producing countries in 2020 is expected to be 2.1-2.34 million barrels per day, and the United States, Brazil, Norway and other countries are expected to grow.
Norway’s oil production will grow by 43% between 2019 and 2024 as new fields come on stream and old production facilities are upgraded, the Norwegian Petroleum Agency said on Thursday.
With the major oil fields Sverdrup and Kastenberg gradually coming into production, crude oil production from the country’s offshore oil fields is expected to reach 2.02 million barrels per day in 2024, up from 1.41 million barrels per day in 2019 barrel/day. At the same time, the Norwegian Petroleum Agency predicts that Norway’s oil production will reach 1.76 million barrels per day in 2020, compared with the forecast of 1.74 million barrels per day a year ago.
In fact, most analysts continue to predict a supply glut in the first half of 2020 and say OPEC and its partners may need to further curb production to prevent a collapse in oil prices. However, OPEC did not elaborate on what next steps will be taken when the agreement expires in March.
The market will now focus on the OPEC meeting to be held on March 5, when OPEC+ members will discuss whether to further extend the production reduction agreement, which will have a key impact on the oil market.
Does international oil price lack a basis for a substantial upward move this year?
After experiencing many days of volatile rising prices, international oil prices have experienced a correction. In this regard, industry insiders interviewed by reporters believe that oil prices will not continue to rise in the short term. From the perspective of this year, there is no basis for a substantial upward move.
Zhu Guangming, a crude oil analyst at Zhuochuang Information, said that crude oil prices will return to fundamentals, and the market will focus on the implementation of OPEC+’s deepening of production cuts. If the deepening of production cuts is well implemented, the crude oil market will continue the previous pattern of shock and rise, and a stronger trend will become the norm in the future oil market.
BMO analyst Russ Visch believes that WTI crude oil will find multiple supports in the $58-58.50/barrel area, including the 50-day moving average, the 200-day moving average and the 50% Fibonacci of the recent rally. The contract retracement is 58.32.
This is where the institution will add investment, and despite the significant move lower, the WTI crude oil medium-term time model remains constructive and supports further gains.
Focus on the three major monthly reports
In terms of data, this week’s crude oil time will usher in the three major monthly reports of EIA, IEA and OPEC Crude Oil Market Report. Last week’s beautyTensions in Iran have triggered supply concerns and international oil prices have fluctuated violently. Investors need to pay close attention to subsequent developments.
From the perspective of demand, the three major international energy agencies predict that the global crude oil demand increase in 2020 will be around 1.08-1.42 million barrels per day. The demand growth rate will be slightly higher than that in 2019, and the corresponding demand growth rate will be 1%. -1.4%, but still lower than the production growth of non-OPEC crude oil of 2.10 million barrels per day to 2.34 million barrels per day. This has prompted the market to call for OPEC+ to cut production broadly.
International Energy Agency (IEA) Director Birol said on Friday that the supply situation in the global oil market is expected to be good in 2020, while demand growth may continue to be weak, thus suppressing oil prices. The apparent oversupply of oil is also at the level of 1 million barrels per day, ensuring ample supply in the global market. “In view of this, Brent oil prices are expected to remain at US$65 per barrel.”
Focus on the signing of international trade agreements
On the economic and trade front, Chinese Vice Premier Liu He went to the United States from January 13 to 15 to sign the first phase of the trade agreement. Trump said he wanted to start phase two trade talks “immediately” and his economic adviser Kudlow said the second phase of negotiations will largely depend on the implementation of the first phase agreement. The latest data showed that China’s inflation was stabilizing, which helped ease concerns about constraints on monetary policy. The U.S. service industry index rose to a four-month high, but business hiring and wages cooled in December, and the labor market may say goodbye to its best days.
Although the trade situation between the two major economies is steadily improving, the World Bank warned that the global economic recovery will be slower than previously expected, which will still limit the rise in oil prices to a certain extent and the economic outlook is not good. This will weaken the market’s demand for crude oil.
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