Late last night, the OPEC+ alliance of oil-producing countries announced that it would increase production by 400,000 barrels per day in January as originally planned, rather than suspending the increase as the market expected. However, “if the market changes, OPEC+ may adjust the planned supply increase.”
According to the OPEC+ official website, the 23rd OPEC and non-OPEC Ministerial Meeting believed that under the latest developments of the new crown epidemic, we should continue to pay close attention to the market and make immediate adjustments when necessary. The next oil production policy meeting will be in January 2022. Held on the 4th of March.
Russian Deputy Prime Minister Novak said that there are many uncertainties about the impact of the Omicron variant on oil demand and that we need to continue to pay attention to population mobility.
The U.S. Department of Energy also stated after the OPEC+ resolution was announced that it has no plans to change the U.S. plan to release oil reserves, that is, it will not sell more reserves.
After the news was released, the main contract of Shanghai crude oil futures fell by 6%, and WTI crude oil futures and Brent crude oil futures fell by 4%. However, the decline lasted for less than two hours. In the early hours of this morning, U.S. and Brent oil prices turned from falling to rising. As of the close, WTI crude oil futures closed up 2.75%; Brent crude oil futures closed up 2.37%. In terms of internal trading, as of the close at 2:30, the main SC crude oil contract closed down 2.11%.
It is worth noting that during the OPEC+ meeting, Iranian oil journalist Reza Zandi tweeted that if OPEC+ decides to stop the agreement to increase 400,000 barrels per day in January, in addition to indicating the impact of the Omicron variant and its impact on the future The preventive reaction of the oil market may also send two clear messages: First, Saudi Crown Prince Bin Salman’s warning to US President Biden “either recognize my status or meet with me to warm up Saudi-U.S. relations.” , or gasoline prices will rise further.” Second, Russian President Vladimir Putin’s warning about Biden’s possible deployment of missiles in Ukraine “Either there is an agreement on Ukraine, or America’s European allies will have to pay high gas prices, and U.S. gasoline prices will remain high.”
On Thursday, the second case of infection with the Omicron variant was confirmed in the United States. The patient was from Minnesota and had previously attended the Comic-Con in New York City. Subsequently, the third case of Omicron variant infection was discovered in Colorado, USA. Just now, 5 cases of infection with the Omicron variant strain have been found in New York, USA, which means that at least 8 cases have been diagnosed in the United States.
Three major international investment banks are firmly bullish on crude oil
Yesterday, Bank of America said in its 2022 Commodity Outlook report that inflation should support commodity prices next year. Strong demand, lower inventories and efforts to decarbonize the economy will all play a role in supporting commodity prices. Brent crude prices could hit $120 a barrel by the middle of next year, and Bank of America expects aluminum, nickel, platinum and silver to all play a role in the transition to green energy. Inflationary pressures are supporting commodity returns, with the energy sector expected to outperform metals and agriculture again next year.
Citibank is also bullish on crude oil: The rebound in crude oil demand after the impact of the mutated virus strain should be very strong. Assuming that the impact of Omicron is not significant, demand growth will reach 4 million barrels per day in 2022; assuming that transportation demand is affected by The Delta epidemic last winter was similar, so demand increased by about 1.8 million barrels per day. Total global oil demand is likely to peak around 2029, but could peak as early as 2025.
Goldman Sachs believes that OPEC+’s decision on Thursday to increase production as planned will not undermine the ongoing structural bull market, and oil prices are still expected to rise. There are “very clear upside risks” to the forecast for Brent crude to average $85 a barrel in 2023. U.S. shale oil producers will remain cautious on spending plans for 2022 due to the recent fall in oil prices. As shale oil production growth slows, OPEC+ spare capacity is set to decrease faster than if the group decided to suspend production increases.
Li Yanjie, a futures analyst at CITIC Construction Investment, said that previously, OPEC+ had stated that it expected the release of 60.7 million barrels of SPR to increase global supply by 1.1 million barrels per day, so the global oil supply pattern would reverse from a shortage of 700,000 barrels per day in December 2021. into a surplus of 400,000 barrels per day, and the supply pattern in January 2022 will expand from a surplus of 1.2 million barrels per day to 2 million barrels per day. Under such a deduction, it is obviously reasonable to suspend the established production increase plan in January 2022. A logical and self-consistent decision. From the EIA perspective, global oil faces a supply shortage of 1.5 million barrels per day in December 2021, while the supply gap is still as high as 1.33 million barrels per day in January 2022. Therefore, oil consuming countries represented by the United States urge the oil production alliance It would not be surprising to increase production to stabilize prices.
Yang An, head of energy and chemical R&D at Haitong Futures, said in an interview with a reporter from Futures Daily that before this week’s OPEC+ meeting, the single-day fluctuations in the crude oil market almost exceeded 5%. The large fluctuations showed that investors were pessimistic and emotionally unstable. Stablize. The time window for this OPEC+ meeting is very critical, and the United States will join forces with other countries to�The country’s selling of strategic crude oil reserves and the mutated strain Omicron have put OPEC+ into a passive position. The sharp plunge in oil prices and the subsequent embarrassing situation of oversupply in the crude oil market have put this month’s OPEC+ meeting under greater pressure.
Yang An further analyzed: “The current market sentiment is at a low point, and the impact of mutant strains on crude oil demand will still take some time to be more comprehensively assessed. The concerns caused by this uncertainty urgently require OPEC+ to make a strong decision to calm down , which is still quite challenging for leaders such as Saudi Arabia. Judging from the atmosphere of the crude oil market in the past month or so, OPEC+’s early decision to refuse to increase production has made consumer countries very dissatisfied, which has also made the supply side and consumer side of the crude oil market very dissatisfied. Confrontation is heating up rapidly, and if this OPEC+ meeting still triggers market dissatisfaction, it is likely to make investors more uneasy. Overall, oil prices still face the risk of significant fluctuations.”
“Based on the Federal Reserve’s hawkish statement on accelerating debt reduction, which may allow the market to continue to trade the negative effects of the start of the tightening cycle, we continue to maintain the judgment that oil prices will oscillate downward. At the same time, we may see that the US dollar continues to face greater upward trend risks, driving oil prices The center of gravity continues to shift downward.” Huang Liunan, senior energy researcher at Guotai Junan Futures, said that considering that the SPR release in the United States and other countries may not be delayed due to the recent drop in oil prices, the downside space for external crude oil is still large, perhaps more than 5 US dollars per barrel. . If hedging transactions by sellers of existing crude oil put options accelerate the price decline, the potential downside for oil prices could be well beyond $5/barrel.
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