One wave has not subsided, and another wave has arisen. After the United States dumped reserves to control oil prices, there has been vague information on increasing production on the supply side recently, which has once again increased the uncertainty of international oil prices.
Analysts said that the core factor in this round of oil price trends lies in the changes in the epidemic. Until the epidemic situation becomes clear, it is difficult to say that oil prices will stabilize in the short term and will maintain a high volatility trend.
There are variables in supply and demand
After the United States dumped oil reserves to control oil prices, the attitude of oil-producing countries that has attracted much attention has surfaced with the conclusion of the recent OPEC+ meeting. It is reported that OPEC+ decided to maintain the original plan to increase oil production by 400,000 barrels per day in January next year at the meeting. However, the OPEC+ communiqué showed that there is the possibility of adjustment in this decision, that is, it will continue to monitor the changes in the epidemic and will promptly adjust it if necessary. Adjust output policy.
It is understood that previously, the market expected OPEC+ to start reducing production increases in January 2022. Obviously, OPEC+’s decision to continue increasing production deviated from the general market expectations before the meeting, and international oil prices once plunged sharply. “The performance of oil prices may be due to concerns about the shift in the always cautious OPEC+ policy tone. U.S. government representatives have held talks with the Saudi Energy Minister, which has also increased market speculation.” An Ziwei, senior energy analyst at Orient Securities Derivatives Research Institute, told a reporter from China Securities Journal express.
However, as the market’s interpretation of the news continues to deepen, crude oil bulls have regained confidence. Goldman Sachs believes that OPEC+’s increase in production will not hinder the structural bull market in oil prices. Its view is mainly from the supply side. On the one hand, upstream investment expenditures in the global oil and gas industry have decreased significantly, pushing up production costs; on the other hand, OPEC+ has too little idle production capacity and cannot release production capacity in time in the face of global demand recovery, resulting in a structural bull market.
“However, global oil demand is currently facing the challenge of a new round of epidemic. Goldman Sachs’ conclusion can only provide support during the rising oil price cycle and does not hold true under the conditions of variables in new demand.” Tian Youjia, crude oil analyst at Everbright Futures, said A reporter from China Securities Journal analyzed that.
“OPEC+ is in the stage of normalizing production capacity. Increasing production is the general trend. However, it is currently facing resistance from the rebound of the epidemic. However, more data are still needed to confirm the infectivity, pathogenicity and vaccine evasion ability of the Omicron virus strain. Phased There is great uncertainty in the path of demand change, and OPEC+’s decision shows that it will continue the lagging adjustment of output policy to demand,” An Ziwei said.
It is difficult to say that it will be stable in the short term.
Judging from the logic of this round of oil price trends, the core factor lies in the changes in the epidemic. From a long-term perspective, global energy transition is one of the important influencing factors.
Although in the long term, carbon neutrality means that both traditional oil supply and demand will be suppressed, analysts are not blindly bearish on oil prices.
An Ziwei analyzed that the emergence of demand substitution effect requires a significant increase in the market share of new energy in traditional oil consumption, and oil demand will remain rigid for a long time to come. On the supply side, traditional oil and gas companies have taken the lead in adapting to energy transformation, and upstream investments have become more cautious. Since the epidemic, upstream investment has recovered slowly, and the recovery of crude oil supply has lagged behind the recovery of demand. The emergence of production capacity bottlenecks in some oil-producing countries and the sharp slowdown in U.S. shale oil production growth. Caution in upstream investment will lead to a decline in long-term supply elasticity, which will support medium- and long-term oil prices.
“If the vaccine is confirmed to be ineffective in the next few weeks, and another large-scale city closure is needed to deal with Omicron, then the market needs not only OPEC+ not to increase production, but to further reduce production, otherwise oil prices may fall further.” An Ziwei He said that the recent trend of oil prices has been moving towards a scenario of large-scale city closures around the world. Until the epidemic situation becomes clear, it is difficult to say that oil prices will stabilize in the short term and will remain highly volatile.
“In the short term, the crack spread of refined oil products has fallen rapidly, which has reflected the weakening of terminal travel demand. In the long term, many institutions estimate that crude oil will still be in a storage accumulation cycle in 2022, and new strains may have multiple impacts on demand, which will have a negative impact on 2022. Oil prices in the first three quarters have maintained a bearish attitude,” Tian said.
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