The global “bear smell” is getting stronger. Last night and this morning, European and American stock markets collectively fell sharply, and commodities plummeted across the board. As of the close, WTI crude oil futures closed down 3.66% at US$105.76/barrel; Brent crude oil futures closed down 1.25% at US$114.81/barrel. Crude oil futures on the Shanghai Futures Exchange closed down 4.55% in night trading at 701.2 yuan/barrel.
OPEC+ maintains its original plan for a slight increase in production in August
On June 30, the 30th OPEC+ Ministerial Meeting was held. This time OPEC will maintain an increase in production of 648,000 barrels per day in August, completely ending the production reduction agreement since the 2020 epidemic. The focus of the market is how OPEC will proceed in September and subsequent months. production plan. Last Friday, Nigeria’s Oil Minister stated that OPEC+ crude oil production capacity is about to be exhausted, including Saudi Arabia, the largest oil producer. Meanwhile, market sources say the UAE is producing oil at near maximum capacity.
In fact, the market has doubts about the ability of Saudi Arabia and the United Arab Emirates to increase production.
“The biggest problem for OPEC at present is not quota constraints, but the limited production that can actually be released at the moment.” Zhang Zhengze, an analyst at Guohai Liangshi Futures, believes that although major countries such as Saudi Arabia and the United Arab Emirates theoretically still have some remaining production capacity that can be released, at present Some people in the market believe that its actual spare capacity is less than theoretically, and the amount that can really be released is limited. What is more critical is the bottleneck in production capacity expansion caused by low capital expenditure and low number of active rigs. The number of active oil rigs in OPEC countries is still far from the pre-epidemic level.
In his view, even as oil prices continue to rise and OPEC countries’ improved fiscal revenue leads to an increase in capital expenditures, it will be difficult for OPEC countries to significantly increase their production during the year because it takes at least eight months for conventional oil wells to drill rigs and produce oil. larger. “This OPEC meeting maintained the production growth of 648,000 barrels per day in August, but did not provide a production policy for September and subsequent years. The impact on oil prices is relatively limited. The market needs to pay attention to the progress of Biden’s visit to Saudi Arabia on July 15.”
“At present, OPEC+ production capacity is relatively limited, and the production capacity of Saudi Arabia and the United Arab Emirates is also relatively limited. It is expected that it will be difficult to have a policy to significantly increase production. Oil prices will still maintain high oscillations, but the focus will be lower than in the previous period.” Xinhu Futures analyst Yan Lili said .
Separately, WTI crude oil prices fell to session lows after US President Joe Biden admitted that he may at least “meet” Saudi Crown Prince bin Salman during his upcoming trip to Saudi Arabia. The market believes that the visit may be a plan by Washington to persuade Saudi Arabia to increase oil production, although the Biden administration has insisted that the visit has nothing to do with oil.
International oil and gas prices fell sharply, with Brent oil and US oil both falling more than 3% during the session, and US natural gas futures plummeting 16%.
As of the close, WTI crude oil futures closed down 3.66% at US$105.76/barrel; Brent crude oil futures closed down 1.25% at US$114.81/barrel. Crude oil futures on the Shanghai Futures Exchange closed down 4.55% in night trading at 701.2 yuan/barrel.
U.S. natural gas futures fell 15% during the day and are now trading at $5.521/million British thermal units.
The EIA natural gas report shows that as of the week of June 24, total natural gas inventories in the United States were 2.251 billion cubic feet, an increase of 82 billion cubic feet from the previous week, a decrease of 296 billion cubic feet from the same period last year, a year-on-year decrease of 11.6%, and a decrease of 5. The annual average was 322 billion cubic feet lower, a decrease of 12.5%.
The 10-year U.S. Treasury yield once fell below the 3% mark, reflecting investors’ increased fear of recession risks and active search for safe havens.
With strong expectations but weak reality, the decline in refined oil cracking expanded.
The recent sharp decline in refined oil cracking has attracted market attention. A reporter from Futures Daily learned that in the early market, the market had strong expectations for the demand for refined oil during the peak season, but gasoline is still in storage, and cracking and falling is a reality. Data released by the EIA on Wednesday night showed that crude oil inventories were destocked, gasoline stocks were full, and oil prices were relatively weak.
It is understood that in the past week, gasoline cracking prices in Europe and Singapore have fallen by nearly $10/barrel, and diesel jet fuel cracking prices in Europe and the United States have both fallen by more than $15/barrel. Although we are currently in the peak transportation season in Europe and the United States, the sharp decline in the crack price of refined oil products reflects that the demand for refined oil products is lower than expected.
In this regard, Zhang Zhengze said that the recent weakening of refined oil cracking spreads is mainly due to the increase in crude oil prices and the inability of refined oil prices to follow up.
“But this only means that the supply and demand situation of refined oil products has begun to weaken at the margin, and the demand side has begun to show negative feedback to high prices. It does not mean that the demand side has collapsed.” In his view, the demand side has begun to show negative feedback in the context of high prices. , the weakening of the crack spread will also squeeze out part of the demand premium. Correspondingly, it can be seen that while the supply side is accelerating production, refined oil inventories are accumulating. “In particular, the accumulation of gasoline inventories shows that the current downstream demand cannot well digest the increase in supply. The inability to follow up on demand during the peak season is largely due to the negative demand feedback caused by high prices.”
“If the price of crude oil falls at the same time, the price of refined oil products falls faster.The market needs to pay attention, which means that demand may really begin to collapse. “Zhang Zhengze said.
In fact, the early high levels of refined oil cracking and low inventories have exacerbated market concerns about the arrival of the peak summer travel season in Europe and the United States.
“Currently, the expected boost to gasoline consumption during the peak travel season is weaker than expected. This is reflected in the continued accumulation of gasoline in the United States in the past two weeks, which means that the suppression of demand for refined oil by high prices has begun to appear.” Nanhua Futures energy analyst Liu Shunchang said that as the market’s recent concerns about the economic recession in Europe and the United States have intensified, and the demand for refined oil, especially gasoline, is lower than expected, the crude oil market is facing increasing pressure on the demand side.
Yan Lili believes that the EIA data released on Wednesday night showed that crude oil is depleted and gasoline is accumulated. The weakness in oil prices is mainly due to relatively weak gasoline consumption in the United States. It is currently the peak consumption season, and the actual consumption of gasoline in the United States will affect the trend of oil prices. Due to the conflict between Russia and Ukraine, U.S. exports are still relatively strong and crude oil inventories (including SPR) continue to decline.
“The main reason for the accumulation of refined oil products is that they are in the seasonal accumulation cycle. During the peak gasoline season, refineries will increase input production, which will passively increase the supply of other refined oil products, thereby causing seasonal Passive accumulation of inventories. However, the accumulation of refined oil inventories in EIA data this week has accelerated, and gasoline has also accumulated.” Zhang Zhengze said that in the off-season, we can talk about expectations for the peak season of gasoline, but when we enter the peak season of gasoline consumption , the market will have more transactions based on actual demand conditions. “Although gasoline demand is still in the peak season and is still resilient, supply and demand are weakening at the margin, and the best time has passed.”
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