Commodities as a whole have entered a rebound rhythm in the past two trading days. Crude oil, supported by production cuts, should have performed well, but oil prices seem to have lost their sense of direction. This week’s trend is weak and the rhythm is disorganized. Even the news that the U.S. Department of Energy said it would issue a new tender to purchase an additional 3 million barrels of crude oil did not stimulate the market, and oil prices ended lower on Friday.
Oil prices have been fluctuating within a relatively narrow range for five consecutive weeks. The lower range is supported by the year’s lows caused by the European and American banking crises, forming the lower edge of the range. The upper range is suppressed by the lower edge of the first quarter’s fluctuation range. The intertwined situation of long and short factors makes it increasingly difficult for investors to place bets, especially after the false news that Iranian crude oil returned to the market came out on Thursday night. The oil price fluctuated significantly by nearly US$4/barrel, making it difficult for investors to place bets. It is difficult for investors to clearly judge the next direction of oil prices. Although the news of Iran’s crude oil exports has been officially refuted, the sharp decline in oil prices after the news created an atmosphere of panic, even affecting commodities such as copper. The impact of such false news on the market has obviously changed the expectations of many investors, especially how to reasonably price the OPEC+ meeting in June to extend production cuts and Saudi Arabia’s own efforts to reduce production by an additional 1 million barrels per day.
Since October last year, OPEC+, led by Saudi Arabia, has made it clear that it will conduct expected management of the oil market, and it is indeed proactive based on several production cuts. Judging from the performance of oil prices after the two production cuts this year, although the production cuts have resolved the risk of a sharp drop in oil prices to a certain extent, it is difficult for oil prices to maintain a strong pattern just relying on the efforts of OPEC+ from the supply side, and the number of production cuts has increased, which has a negative impact on the market. The intensity of stimulation is gradually weakening. The market’s continued concerns about global economic growth have cast a shadow on crude oil demand expectations, especially economic data showing that the European region has entered a technical recession and the world is facing economic slowdown pressure, which limits investors’ bullish expectations for oil prices.
Shortly after the OPEC+ meeting ended, the EIA’s short-term energy outlook for June released on Tuesday emphasized that global oil inventories are forecast to fall slightly in each of the next five quarters after OPEC+ announced on June 4 that it will extend crude oil production cuts until 2024. decline. Drawdowns in global oil inventories will put some upward pressure on crude oil prices, especially in late 2023 and early 2024. The price of WTI crude oil is expected to be US$74.60/barrel in 2023, compared with the previous forecast of US$73.62/barrel. The price of WTI crude oil is expected to be US$78.51/barrel in 2024, compared with the previous forecast of US$69.47/barrel. The Brent price is expected to be US$79.54/barrel in 2023, compared with the previous forecast of US$78.65/barrel. The Brent price is expected to be US$83.51/barrel in 2024, compared with the previous forecast of US$74.47/barrel.
On the supply side, despite the extension of OPEC+ production cuts, EIA forecasts that global liquid fuel production will still increase by 1.5 million barrels per day in 2023 and 1.3 million barrels per day in 2024, mainly due to growth from non-OPEC producers. The main sources of non-OPEC growth include the United States, Norway, Canada, Brazil and Guyana. OPEC crude oil production will fall by 600,000 barrels per day in 2023 and then increase by 300,000 barrels per day in 2024, which is lower than the EIA’s previous forecast.
On the demand side, EIA estimates that global liquid fuel consumption in 2023 is expected to be raised by 30,000 barrels per day to 1.59 million barrels per day, from the previous estimate of 1.56 million barrels per day. The global crude oil demand growth forecast in 2024 is lowered by 20,000 barrels per day to 1.7 million barrels per day, compared with the previous estimate of 1.72 million barrels per day. U.S. crude oil demand growth is expected to be 150,000 barrels/day in 2023, compared with 190,000 barrels/day previously. U.S. crude oil demand growth is expected to be 260,000 barrels/day in 2024, compared with 330,000 barrels/day previously. U.S. crude oil production is expected to increase by 720,000 barrels/day in 2023 from 640,000 barrels/day previously, and U.S. crude oil production is expected to increase by 160,000 barrels/day in 2024 from 160,000 barrels/day previously.
In terms of refined oil consumption, EIA predicts that the consumption of gasoline and aviation fuel will increase in 2023, driven by the service industry and tourism. Consumption of gasoline and jet fuel is expected to grow more slowly through 2024. The U.S. economy relies more on services than manufacturing, which is why diesel is disconnected from economic growth. The previous trend of linking U.S. diesel consumption to economic growth was broken in the first quarter of this year.
The latest weekly data from the EIA showed that U.S. Gulf Coast refinery utilization rose last week to the highest level since December 2018. EIA data showed U.S. refinery utilization rose to the highest level since August 2019. U.S. crude oil production that week was the highest since the week of April 3, 2020. China’s refining operations have also remained at a high level in more than two years. The operating rate of main refineries has increased. However, the operating rate of local refineries has declined recently due to factors such as maintenance and raw materials. Overall, although the market is worried that the downward pressure on the global economy may affect demand performance in the second half of the year, the recovery of crude oil market demand is acceptable at present. The market is even more worried about the performance of crude oil market demand in the second half of the year as the downward pressure on the global economy increases. .
Oil prices fell instead of rising over the past week, closing slightly lower on the weekly basis. There is no doubt that the marketThe final result of the highly watched OPEC+ ministerial meeting in June disappointed investors. Although most institutions predict that the crude oil market will once again be in short supply in the second half of the year, and oil prices will also have certain upward pressure in the context of destocking, but standing in the At this time, investors are more worried about the uncertainty of the subsequent crude oil market than the positive changes brought about by production cuts. The near-end structure of WTI crude oil has once again turned into a discount, but this does not mean that there is a risk of a sharp fall in oil prices. Although investors are not willing to chase the rise, under the management of OPEC+ expectations, there is no obvious risk of deterioration in supply and demand for the time being, and oil prices are likely to continue to maintain range-bound oscillations. Investors need to pay attention to strengthening risk control when choosing opportunities carefully. (Author’s unit: Haitong Futures)
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