Saudi Arabia’s latest statement!
According to Reuters and Al-Arabiya TV, yesterday, at the OPEC+ seminar in Vienna, Saudi Energy Minister Abdul Aziz said that the new production cuts proved that onlookers who were skeptical of Russia-Saudi relations were wrong. Yes, OPEC+ will take all necessary measures to support the market.
The Saudi Energy Minister stressed the importance of fairness and maintaining the unity of the OPEC+ group. In order for each member to be treated fairly, they must maintain a focus on long-term issues to avoid distortions.
On Monday, Saudi Arabia and Russia announced that they would extend and deepen production cuts in August. In response, the Saudi Energy Minister said that Russia would voluntarily cut oil exports, rather than being forced to cut them. Russia’s oil production cuts are significant. Saudi Arabia’s production reduction is due to market demand and OPEC+’s expectation of immediate demand. Saudi Arabia’s voluntary reduction of oil production is due to the consensus and agreement reached by OPEC+. The OPEC+ agreement achieves market stability.
In terms of market conditions, last night, the front-month contract of WTI crude oil futures rose sharply across the board, approaching the top of the narrow range of fluctuations in several weeks. NYMEX crude oil and NYMEX fuel are all in red.
As of this morning’s close, WTI August crude oil futures closed up 2.87% at $71.79 per barrel. Brent September futures closed up 0.52% at $76.65 per barrel.
Spartan Capital analyst Peter Cardillo said this round of gains is technical and short covering is the main reason.
There are also negative news. Morgan Stanley lowered its oil price forecast on Wednesday, lowering its forecast for Brent oil price in the third quarter of this year from US$77.5/barrel to US$75/barrel, and lowering its forecast for the fourth quarter from US$75/barrel. to $70/barrel, and it also lowered its forecast for next year by $5/barrel. The bank predicts that the market will be oversupplied in the first half of 2024, and that supply from non-OPEC countries will grow faster than demand next year. The bank said that despite lower investment, supply from non-OPEC+ countries has been growing strongly, with supplies from Iran and Venezuela climbing. They are still modeling inventory levels for the third quarter but expect oil price weakness to continue as the market’s focus shifts to the first half of next year. However, the decline in inventories in the third quarter due to OPEC production cuts may support Brent oil to maintain a level near $70 per barrel.
Li Yunxu, an analyst at SDIC Essence Futures, told a reporter from Futures Daily that the supply reduction of crude oil in the third quarter and the destocking of crude oil during the peak demand season are still expected to continue, but there is a lack of marginal variables in the recent fundamentals. The weak overseas demand at the expected level and Saudi Arabia’s initiative to reduce supply at the actual level The game is still going on, and the oscillation pattern is difficult to change. The possible drivers in the later period will focus on the extension of Saudi Arabia’s additional production cuts, the evolution of the Fed’s interest rate hikes and the expected evolution of the pace of overseas recession, as well as disturbances from geopolitical factors related to Iran or Russia.
According to Li Yunxu, on the demand side, EIA data showed that the U.S. refinery operating rate fell from 93.1% to 92.2% in a single week, breaking away from the seasonal high level in the same period. Cushing crude oil inventories accumulated but commercial crude oil inventories fell, and the apparent demand for gasoline was basically flat. , the U.S. market shows the characteristics of flat domestic peak season demand but strong exports, which drives destocking. China’s single-week refinery operating rate rose from 76.37% to 77.3%, and processing volume has continued to remain high since the second quarter. Last weekend, the United States announced that it would seek to purchase more strategic petroleum reserves. The low replenishment of strategic petroleum reserves in the second half of the year may provide some support for demand, but the replenishment space is expected to be smaller compared with last year’s reduction. Overall, the demand side still shows the expected characteristics of internal strength and external weakness, and attention is paid to the continuity of overseas destocking during the peak demand season.
On the supply side, EIA data released last week showed that U.S. crude oil production remained flat at 12.2 million barrels per day. Baker Hughes data showed that the number of active oil rigs in the U.S. fell from 546 to 545 in a single week. The downward trend since the second quarter has continued. It is difficult to break the expectation that shale oil production will increase slowly. At present, the voluntary production cuts started by some OPEC+ countries in May have been implemented for two months. Reuters survey data shows that OPEC production in June decreased by 50,000 barrels per day compared with May. The month-on-month change is not obvious. The relative strength of the Middle East oil discount may have begun to reflect the production cuts. effect, but the continued sideways oscillation of oil prices and monthly differences also reflects that the supply shortage in the global dimension is not obvious. According to Saudi Arabia’s additional production reduction plan, production will be reduced by another 1 million barrels per day in July. In the later period, the focus will be on the pace of exiting its additional production reductions. Maintenance of Russian terminals and additional production cuts by Saudi Arabia caused global crude oil shipments to decline month-on-month in July, but the factors exceeding expectations are limited. Geographically expected deviations are still worthy of attention.
Dong Dandan, chief analyst of CITIC Futures Energy, believes that from the perspective of terminal consumption, air transportation continues to rise, and the limited growth space of land transportation has once again been confirmed. Traffic levels in other regions of Europe, North America and Asia also fell by 5.5% month-on-month last week.��, 1.6% and 2.6%. Passenger flights increased by 1.5% month-on-month last week, and Asia and Western Europe, the growth engines, are both expected to increase by 1.4%. The latest economic data in the United States are very positive, including an upward revision of first-quarter GDP, the consumer confidence index in June rose to the highest level since the beginning of 2022, the annualized rate of new home sales in May hit the highest level in more than a year, and U.S. housing prices in April hit their third consecutive U.S. business equipment orders increased for the second consecutive month in May, and the number of initial jobless claims last week dropped by the largest amount since October 2021. Correspondingly, the American Automobile Industry Association estimates that more than 43 million people will drive during the National Day holiday in the United States, an increase of 4% over 2019, setting a record in absolute terms; revised data released by the EIA show that in April this year, U.S. oil Demand rose to the highest seasonal level in 16 years, and consumption of ethane and NGL was good. China’s manufacturing PMI index in June improved slightly from May, which also shows that demand in the world’s second largest crude oil consumer remains stable.
“The benefits of Saudi Arabia and Russia’s production cuts have been fermented on the market. Saudi Arabia has cut production. Major buyers in Asia have turned to other markets to snap up crude oil. China, India and Indonesia have begun to purchase crude oil from Angola and Nigeria. Arbitrage trades from the European North Sea to Asia have also Let’s start again. The current trend of crude oil monthly difference and refined oil crack price difference is consistent with the trend of crude oil absolute value. Once there is not much bad data on the macro side and the Sino-US economy will not experience a sharp recession, then crude oil prices may be supported by the supply side. The oscillation is rising.” Dong Dandan said.
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