In recent times, domestic crude oil futures have continued to rise, and their performance has been much stronger than the trend of international oil prices. On August 24, the main intraday SC crude oil contract rose sharply by 5.05% to close at 734.1 yuan/barrel, setting a new high in the past two months and setting a strong performance for seven days in a row.
However, the early trend of international oil prices was relatively weak. On Wednesday, the main Brent crude oil contract returned to above US$100/barrel, and the main WTI crude oil price reached a maximum of US$95.4/barrel during the day, beginning to catch up with the recent strong performance of SC crude oil. Several analysts told reporters from Futures Daily that the recent intraday price trend of SC crude oil has been stronger than that of Brent, WTI and other international crude oils, which is caused by various factors such as differences in supply and demand of varieties, freight rates, and the number of warehouse receipts. Chen Tongbiao, an analyst at Yide Futures, told reporters that the subject matter of domestic SC crude oil futures is medium crude oil, while Brent and WTI are light crude oil. Recently, due to the increase in the production of light crude oil in Libya and North Sea oil fields, the balance between medium quality and light crude oil has increased. The price difference of crude oil has strengthened significantly.
In addition, he said that global seaborne crude oil exports climbed to the highest level in nearly two years, driving shipping freight rates from the Middle East to China to rise sharply.
“The increase in crude oil shipments from the Middle East has caused tanker freight rates from the Middle East to China to almost double. my country imports more oil from the Middle East, and rising transportation costs have supported internal oil prices.” Zhu Ziyue, an analyst at CITIC Futures, said. Li Jie, an analyst at CCB Futures, said that since July, domestic crude oil futures warehouse receipts have been canceled rapidly, and most of the canceled warehouse receipts are Basra light oil that is difficult to be digested by local refineries. The reduced pressure on warehouse receipts has supported the apparent strengthening of domestic oil prices. Regarding the strong continuous rise of domestic crude oil futures, Zhu Ziyue believes that due to the differences between domestic and foreign economic operating rhythms, the recent marginal improvement in domestic refinery feed demand has formed a certain support for domestic and foreign price differences. Before the number of registered warehouse receipts rebounds, the internal market is stronger pattern or persistence. However, in Chen Tong’s view, the above-mentioned factors that led to the relative strength of SC crude oil lack sustainability. At present, the positive factors have been fully realized, and it is expected that the price of SC crude oil will be difficult to get out of the independent market in the future. Looking at the market outlook, they all believe that the key to short-term oil price trends lies in the progress of the resumption of the Iran nuclear agreement. Foreign media reported that a senior U.S. official said this week that Iran has given up on some key demands for the restoration of the nuclear agreement, which greatly increases the possibility of reaching an agreement.
Chen Tong said that Iran’s crude oil production in July was 2.55 million barrels per day, and before sanctions, Iran’s crude oil production was 3.8 million barrels per day. If the Iran nuclear deal is implemented, Iran’s crude oil production will have room to grow by 1.25 million barrels per day. In addition, Iran has 100 million barrels of crude oil and condensate inventories that can be released to the market almost immediately. It is worth noting that the short-term competition over supply expectations among oil-producing countries continues to intensify. Saudi Arabia has responded strongly to Iran’s potential increase in crude oil and stated that it has begun to formulate a production reduction plan after 2022. OPEC+ sources said that if Iranian crude oil returns to the market, OPEC+ may choose to cut oil production. Zhu Ziyue said that the increase or decrease in crude oil supply from Iran, Russia and OPEC countries led by Saudi Arabia will be the dominant factor in the later period. In the medium term, Chen Tong believes that from a macro perspective, the pressure on the Federal Reserve to curb price increases by raising interest rates continues to exist. The more aggressive tightening policies adopted by major Western central banks have restricted economic activities, and expectations of a global economic recession continue to rise, putting upward pressure on oil prices. Geographically, the EU will impose a ban on most Russian crude oil exports starting in December this year. About two months later, the EU will also take similar measures on naphtha and other products, but whether it can finally be implemented is still doubtful. In terms of supply and demand, with the arrival of the peak season for oil product demand in the fourth quarter, it is expected that crude oil inventories will still be difficult to increase significantly. Taken together, he said that the game between macro and micro factors in the crude oil market has led to intensified price fluctuations, and investors still need to pay attention to the actual changes in OPEC+ production, including Iran and Russia. Data released by the U.S. Energy Information Administration (EIA) on Wednesday showed that U.S. commercial crude oil inventories fell by 3.282 million barrels to 422 million barrels in the week ended August 19, the lowest since the week of June 24, 2022; the U.S. Strategic Petroleum Reserve (SPR) inventories fell by 8.091 million barrels to 453.1 million barrels, marking the 50th consecutive week of decline and the lowest since the week of January 11, 1985.
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