When the oil price touched US$100/barrel, everyone could still joke: We had just experienced negative oil prices that subverted our understanding. Unexpectedly, we would see high oil prices of US$100/barrel in less than two years. Poverty limits imagination. . But in fact this is just the beginning of poverty…
The time has just entered March, and the main Brent crude oil futures contract has risen directly from US$98/barrel to US$120/barrel. An increase of more than US$20/barrel in three days has never occurred in the history of oil prices. Commodity prices rose by 13% in a single week, setting a record for weekly gains, and the performance of the crude oil market was even more impressive, making it difficult for many investors to resist. In fact, this is just part of the crazy performance of oil prices. As the market realizes that Russian crude oil exports are increasingly affected by sanctions and war, a large international trader has discounted its Russian Urals crude oil to a record price of US$22.70 per barrel compared to Dated Brent crude oil. There is still no one to take the order (there was news on Friday night that a deal was finally reached at a discount of US$28.5/barrel), which amplified the panic in the physical market, and buyers turned to seek supply from other regions, which also pushed up the price sharply. Premiums for major spot prices in the Middle East. After the surge, the market accumulated a large amount of high-level floating chips. Under the impact of factors such as the power game between the parties in the Russia-Ukraine conflict and the Iran nuclear agreement, oil prices have experienced sharp reversal fluctuations of more than $8/barrel on several occasions during the day.
Such fluctuations have also triggered heated discussions in the market. The market is divided on whether oil prices have risen too much or whether they will reach higher targets later. In fact, almost all opinions are based on the assumptions of specific scenarios. The biggest uncertainty at present is the progress of the conflict between Russia and Ukraine. It seems difficult to resolve it in the short term, and it is difficult to predict how it will end. What we can learn is that the sanctions currently facing Russia can be said to be unprecedented, and Western countries are still increasing sanctions, which is obviously not good news for the stability of energy market supply. The performance of oil prices in the past period can be said to be A reaction that constantly assesses and calculates the extent of the impact on Russian crude oil exports. Obviously the market is very uneasy about this. The 12-month price difference in the crude oil market once widened to more than 27 US dollars. This is already a very extreme situation, and there will be more in the future. Are there more extreme manifestations?
Sanctions on Russia trigger supply-side changes
Thank you for being in a stage where information sharing is very efficient. In the past week, the impact of sanctions imposed by Western countries on Russia on the supply and demand pattern of the entire crude oil market has become increasingly clear to the market. Major research institutions and senior industry experts have provided detailed analysis and outlook on the impact of sanctions on the Russian crude oil market. After aggregating information from all parties, we can learn that Russia is one of the world’s third largest oil producers, second only to the United States and Saudi Arabia. In January 2022, the total production of Russian oil (including all oil products such as crude oil, condensate, and natural gas liquids, the same below) was 11.3 million barrels/day, of which crude oil production was 10 million barrels/day and condensate 960,000 barrels /day, natural gas liquids 340,000 barrels /day. By comparison, total U.S. oil production is 17.6 million barrels per day, while Saudi Arabia’s oil production is 12 million barrels per day.
If total exports of crude oil and refined oil products are taken into account, Russia is the largest exporter of oil products on the global market and the second largest exporter of crude oil after Saudi Arabia. In December 2021, the total export volume of Russian crude oil and refined oil products was 7.8 million barrels/day, of which crude oil and condensate were 5 million barrels/day, accounting for 64%; the total export volume of petroleum products was 2.85 million barrels/day, Among them, diesel is 1.1 million barrels/day, fuel oil is 650,000 barrels/day, naphtha is 500,000 barrels/day, gas oil (VGO) is 280,000 barrels/day, gasoline, liquefied petroleum gas, aviation fuel and petroleum Jiao accounts for the remaining 350,000 barrels per day. According to BP statistics, Russia’s crude oil export volume in 2020 was 5.207 million barrels per day, accounting for about a quarter of the total global crude oil export trade, and refined oil export volume reached 2.226 million barrels per day, accounting for approximately 2.226 million barrels per day of the global refined oil export trade. One-tenth of the total amount.
About 60% of Russia’s oil (including crude oil and refined oil) is exported to the OECD European region, and the other 20% is exported to China. In November 2021, the latest official monthly oil statistics showed that OECD Europe imported 4.5 million b/d of oil from Russia (34% of its total imports), of which 3.1 million b/d was crude oil and feedstocks Oil, 1.3 million barrels/day is refined oil. In November 2021, the OECD Asia-Pacific region imported 440,000 barrels/day of oil from Russia (accounting for 5% of total imports), and the OECD Americas region imported 625,000 barrels/day (accounting for 5% of total imports). 17% of total imports). In addition, the International Energy Agency believes that China is the largest single buyer of Russian oil, purchasing an average of 1.6 million barrels of crude oil per day in 2021.
In terms of Russian oil exports, it is mainly through pipeline transportation and sea transportation, of which slightly more than half is pipeline transportation. The main reason for the plummeting discount of Russian Urals crude oil mentioned earlierUnder the influence of unprecedented supply tightness and market sentiment, we have noticed that major institutions in the market have begun to predict oil prices from US$120/barrel to US$200/barrel, and investors have also plucked up the courage to bet on oil prices going higher. target price. The U.S. Commodity Futures Commission CFTC report showed that as of the week of March 1, the net long position of NYMEX WTI crude oil held by speculators increased by 8,430 lots to 280,790 lots; while the stronger Brent crude oil attracted more buyers, Intercontinental Exchange ICE data showed that speculative net long positions in Brent crude oil futures increased by 18,047 contracts to 254,794 contracts last week, a new high in more than four months.
Continuous surges have forced short investors to admit defeat. A typical example is Citibank, which was initially short on the trend of oil prices in the second half of the year. It announced an 11.5% loss to end its short position in Brent futures in December 2022. I believe this is just a cut in the process of the surge in oil prices. In fact, in the recent violent fluctuations of more than 8 US dollars in a day, it is not just the short side that has cut its positions. Investors who cannot keep up with the rhythm will inevitably be swallowed up by such violent fluctuations. The current supply level is in a highly elastic and unstable state, and tight expectations are the consensus. Oil prices are relatively easy to rise but difficult to fall. As mentioned at the beginning of the report, the oil price target is a stage that requires imagination. Compared with crude oil prices, Based on the forecast, we also recommend that investors respond to possible situations, strengthen risk management and control for crude oil industry customers, and avoid exposure risks as much as possible. In this stage of extreme fluctuations driven by emotions, it is recommended that investors first do a good job in risk management, and under this premise, carefully choose trading opportunities.
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