Oil prices have experienced sharp ups and downs in recent times, which is far from normal. The views of both bulls and bears on oil prices have collided fiercely. The amplitude of the high and low points of oil prices in the past week was around 7%. Historically, such an amplitude is not considered a super market, but if you participate in it, the experience will be very different, especially in the past three trading days, oil prices have experienced several ” V-shape” sharply turns back. On the day of the OPEC meeting on November 4, there was even an intraday “selling” market price of $5/barrel. After a sharp rebound Friday night, oil prices recouped most of their losses, leaving investors scratching their heads.
Ahead of this week’s OPEC meeting, U.S. President Biden urged major energy producers in the Group of 20 countries with idle capacity to increase production to ensure that the global economy For a stronger recovery, it is recommended that major oil-producing countries increase production by 800,000 barrels per day in December. Japan and India have also made relevant proposals, but Saudi Arabia, OPEC’s main oil producer, rejected the request citing economic difficulties. Saudi Arabia is worried about increasing production too quickly and about encountering another setback in the fight against the epidemic and economic recovery. The Saudi oil minister said that due to slowing consumption, oil inventories will see a “huge” increase at the end of 2021 and early 2022. A spokesman for the U.S. White House responded. Said: “At a critical moment in the global economic recovery, OPEC+ seems unwilling to use its existing production and capabilities. We continue to monitor the market and are prepared to use all tools if needed.” U.S. President Biden is “considering” possible strategic oil Reserve release; OPEC’s actions have caused dissatisfaction in the United States. U.S. Energy Secretary Granholm said that oil is a global market controlled by a monopoly alliance called OPEC. The Saudi Oil Minister emphasized that OPEC+ is a responsible market regulator and that OPEC+ acts in a responsible manner.
The crude oil market is still in tight supply in the near term and is expected to resume in the long term. The strong and weak actual situation of the accumulated library is expected. The direct competition between major oil-producing countries and consuming countries has also heated up significantly, which will become a major focus of the market in the future.
Fundamentals are not enough to continue to support oil prices
The most important factor affecting the supply level of the crude oil market last week was the OPEC+ monthly meeting. The meeting was very short. OPEC and its allies, including Russia, reached an agreement to stick to the plan to increase oil production by 400,000 barrels per day starting in December. . Oil-producing countries such as Saudi Arabia have rejected requests to increase production.
Sources from OPEC+ said the United States has enough capacity to increase production if it believes the world needs more energy. Saudi Arabia and Russia are increasingly confident that higher prices will not prompt a rapid increase in U.S. shale oil production. In fact, the OPEC production reduction implementation rate reached 118% last month. Nigeria, Angola and other countries have lowered their production than expected due to equipment investment and other factors. Due to years of long-term mismanagement, Venezuela’s National Petroleum Company has cut its oil production target by 1 /3 to 1 million barrels/day. Since President Maduro set an ambitious production target of 2 million barrels per day in January 2020, the Venezuelan government has been forced to revise the production target three times. The company is currently working to “restore and stabilize production” between 2022 and 2025, according to the document. The plan has two key objectives: ensuring a steady supply of oil to domestic refineries and converting remaining crude into commercial grade crude suitable for export.
The U.S. Biden administration said Saudi Arabia and Russia are making mistakes on their crude oil policies. A White House spokesman said on Thursday: “At a critical moment in the global economic recovery, OPEC+ appears unwilling to use its existing capacity. The President believes Americans should have access to affordable energy, including at the pump, and has directed us to continue to monitor the market and be ready to use all our tools if needed.” Earlier Friday, U.S. Energy Secretary Jennifer Granholm said the government was considering the possibility of releasing oil from strategic reserves. OPEC+ maintains its production growth of 400,000 barrels unchanged, which is a disguised push for peace talks between the United States and Iran as soon as possible. At the previous G20 meeting, Biden “clearly promised” that the United States is willing to return to and fully comply with the Iran nuclear agreement as long as Iran resumes compliance with the agreement. The United States also knows that only the Iranian issue can substantially suppress current crude oil prices. It is reported that Iran has made it clear that it will conduct a new round of negotiations with the European Union on the Iran Nuclear Agreement on November 29.
On Friday, Saudi Aramco raised the selling price of December Arab Light crude oil (Arab Light) to Asian customers by US$1.40-2.70 per barrel. More than 60% of Saudi Arabia’s crude oil exports are sold to Asia, with China, South Korea, Japan and India being the largest buyers. Saudi Aramco raised prices more than market expectations, suggesting the kingdom believes demand is still improving, especially in Asia. This also contributed to the sharp strengthening of oil prices on Friday night.
Of course, the fundamentals of the crude oil market are not all good news for oil prices. The latest EIA weekly report data shows that the change in U.S. crude oil inventories in the week ending October 29 actually increased by 3.29 million. barrels, expected to increase by 2.25 million barrels, and the previous value increased by 4.268 million barrels. Gasoline inventories actually reported a decrease of 1.488 million barrels, and the expected decrease was 1.25 million barrels.The value decreased by 432,000 barrels. The EIA report shows that commercial crude oil inventories in the United States excluding strategic reserves in the week to October 29 were the highest since the week of August 13, 2021. The increase in EIA refined oil inventories in the United States in the week to October 29 was the largest since the week of July 9, 2021. U.S. gasoline inventories fell to their lowest levels since November 2017. What is important is that U.S. crude oil production increased by 200,000 barrels to 11.5 million barrels per day, returning to the highest level during the year. An increase of approximately 300,000 barrels is expected for the rest of the year.
Demand aspect. The epidemic is also a factor that the market needs to pay attention to. The epidemic situation in many European countries such as the United Kingdom, Germany, and Russia is severe. The number of newly confirmed cases of COVID-19 announced by the German Disease Control and Prevention Agency on the 5th once again hit a new high since the epidemic, reaching 37,120 cases. The number of newly confirmed cases in the country in a single day has set a new record for two consecutive days. German Federal Health Minister Spahn said after a meeting with state health ministers that day that the federal government and states have agreed to provide booster shots of the new coronavirus vaccine to people of all ages. He emphasized that Germany must speed up the progress of booster vaccination. Spahn warned that the coming weeks would be “very difficult.” The current round of spot-like epidemics scattered in nearly 20 provinces in my country has also made prevention and control more difficult. It is understood that many places in the country have begun to promote vaccination of students aged 3 to 11 years old.
Saudi Energy Minister Prince Abdulaziz said on Thursday that oil-producing countries are worried about increasing production too quickly and are worried about suffering another setback in the fight against the epidemic and economic recovery. Oil inventories will see “huge” growth in late 2021 and early 2022 as consumption slows. Russian Deputy Prime Minister Novak said that since August, OPEC’s supply to the global market has increased by 2 million barrels per day, and plans to continue to add 400,000 barrels per day in the second half of 2021 and early 2022. In October, oil demand in the European Union showed signs of declining. Global oil demand remains affected by the Delta variant virus outbreak.
At the macro level, there are expectations of tightening liquidity
The recent intensive Macroeconomic events have also disturbed global financial markets. The Federal Reserve announced at its interest rate meeting that it will reduce QE. In addition, the Federal Reserve is no longer as sure as before about whether the surge in inflation is a temporary phenomenon. Powell said that for now, the Fed will remain “patient” in deciding when to raise interest rates, arguing that it is not the time to raise interest rates yet and that some progress needs to be made to reach full employment.
Data released by the U.S. Department of Labor on the 5th showed that the U.S. unemployment rate fell by 0.2 percentage points to 4.6% in October, and the number of new jobs in the non-agricultural sector was 531,000, exceeding the market Generally expected; data show that the U.S. unemployment rate continued its downward trend in October, but was still higher than the level before the outbreak of the new crown epidemic in February last year. The number of unemployed people fell to 7.4 million month-on-month, 1.7 million higher than in February last year. At the same time, the number of long-term unemployed people who have been unemployed for more than 27 weeks fell by 357,000 from the previous month to 2.3 million, which is still 1.2 million higher than before the epidemic.
Strong non-farm payroll data and the Fed’s reduction in bond purchases point to an overall upward trend for the US dollar. However, the dovish attitude of Federal Reserve Chairman Powell in raising interest rates has caused the market to hesitate. We have seen the hesitation of the US dollar trending higher and falling back. However, generally speaking, the gradual strengthening of the US dollar is the basic rhythm, which will also have an impact on crude oil, crude oil, and crude oil. The performance of commodities such as copper has been affected.
Some industry insiders who have been deeply involved in the industry for many years said that there is no need to over-interpret Saudi Arabia’s increase in official prices. A comprehensive assessment of the strength of near-end oil prices does not mean that oil prices will follow that of natural gas in the future. , coal prices are the same, this is also very clear to major oil-producing countries such as Saudi Arabia. The excessive surge in oil prices will not only harm the recovery of the global economy, but may also do more harm than good to OPEC itself. For funds that start from the perspective of asset allocation, they have gradually withdrawn from their net long positions in the commodity market. Data released by the U.S. Commodity Futures Trading Commission showed that as of the week of November 2, speculators’ net long positions in Brent and WTI crude oil decreased by 22,692 contracts, while data from the Intercontinental Exchange also showed that speculative net long positions in Brent crude oil futures decreased by 9,690 contracts. The number of contracts traded reached 249,836 contracts, a new low in the past 10 weeks. Apparently, more and more funds no longer recognize high oil prices. </p
