After a surge in crude oil prices this year, the gains have now paused.
As of November 12, Eastern Time, Brent crude oil fell by US$0.70 to close at US$82.17 per barrel, a decrease of 0.8%. U.S. crude oil fell $0.80, or 1%, to close at $80.79 a barrel.
It is worth noting that both major benchmark contracts fell for the third consecutive week as the U.S. dollar strengthened and the Biden administration may use strategic petroleum reserves to cool oil prices. For the week, Brent crude fell 0.7% and U.S. crude fell 0.6%.
Regarding the current market conditions, Tony Sycamore, a senior analyst at Jiasheng Group, told reporters that the United States officially relaxed travel restrictions on November 8, causing oil prices to soar, exceeding 84 Dollar. However, OPEC lowered its demand forecast and the market was worried about the United States dumping reserves, which caused oil prices to retreat to around $81.
EIA and OPEC monthly reports release negative signals
The latest monthly report released by OPEC on November 11 showed that soaring energy prices may suppress oil demand in some of the fastest-growing economies this year.
OPEC said in its monthly market report that global oil demand will grow by 5.7 million barrels per day this year, 160,000 barrels less than last month’s forecast. The downward revision means OPEC Oil demand in 2021 is now expected to be 96.44 million barrels per day; global oil demand in 2022 has also been revised down by 160,000 barrels per day.
Global oil demand expectations for this year and next, source: OPEC
In addition , OPEC also lowered its global oil demand forecast for the last quarter of 2021, believing that high energy prices have inhibited the economic recovery from the new crown epidemic. OPEC expects average oil demand in the fourth quarter of 2021 to be 99.49 million barrels per day, an increase from the previous month The forecast is 330,000 barrels per day lower. OPEC also lowered its crude oil demand forecast for 2022 by 100,000 barrels per day to 28.7 million barrels per day.
It is worth noting that high oil prices are hurting demand. OPEC has warned that oil demand from China and India may now be lower than expected. Amid tight global energy supplies, soaring fuel costs are showing signs of suppressing demand.
However, despite this, OPEC still expects demand next year to be higher than pre-epidemic levels. Oil demand next year is expected to reach 100.6 million barrels per day, 500,000 more than in 2019. bucket.
Regarding the negative signal released by OPEC’s monthly report, Sycamore told reporters that OPEC lowered its forecast for 2021 on Thursday as high energy prices inhibited the economic recovery from the new crown epidemic. Global oil demand forecast for the last quarter of 2020, however, the organization maintained its forecast for strong growth in 2022 to above pre-epidemic levels.
Similar to OPEC, on November 9, Eastern Time, the U.S. Energy Information Administration (EIA) also predicted that by the beginning of next year, the international oil market will experience oversupply. Oil prices will also fall.
Specifically, the EIA predicted in the “Short-term Energy Outlook” report that the price of U.S. benchmark crude oil (WTI) will fall below US$80 per barrel by December this year, and will fall below US$80 per barrel by the end of next year. After hitting a low of $62 per barrel before, global benchmark Brent crude oil will average $72 per barrel in 2022; in addition, U.S. gasoline prices will fall below $3 per gallon by February next year.
EIA further stated, “We expect that as OPEC+ and U.S. production increases, as well as global oil demand growth slows, global oil inventories will begin to increase in 2022. ”
Where are you heading after running wildly?
At a time when the future is full of uncertainty, OPEC+’s vigilance towards increasing production will undoubtedly support oil prices. OPEC+ agreed at last week’s meeting to continue with its plan to increase oil production by an additional 400,000 barrels per day from December, rejecting U.S. calls to further increase oil supplies. Sources from OPEC+ also said that the United States has enough capacity to increase production if it believes that the world economy needs more energy.
In addition, as demand recovers, although OPEC+ is easing production cuts implemented in April 2020, the alliance has not met its policy commitments due to insufficient production capacity in some members scale of production increase.
Russell Hardy, CEO of Vitol Group, the world’s largest oil trader, said that because OPEC oil-producing countries still retain idle production capacity of 2 million to 3 million barrels per day, the oil market is in short supply. It is expected that oil prices are likely to rise to US$100/barrel in the future.
Former US Secretary of Energy Rick Perry also predicts that oil prices may rise to US$100 per barrel in the next six months. At the same time, Perry also criticized the Biden administration’s energy policy, saying that the Biden administration’s restrictions on the development of the U.S. oil industry and rising domestic costs may lead to a “disaster.”
Sycamore told reporters that the oil price had exceeded 80 US dollars before, which was already expected by people. High natural gas prices provided support for the rise in oil prices, and the demand for fuel oil and distillate oil shifted from natural gas to fuel oil and distillate oil. Demand may increase refinery profit margins to a certain extent and support crude oil prices. Although it seems that oil prices have lost some momentum now, we needFortunately, as supply constraints exist and demand remains strong, there is indeed a possibility that oil prices will exceed US$90. Goldman Sachs also raised its oil price forecast from US$80 to US$90.
However, it should be noted that after rushing all the way to break through 80 US dollars, the upward momentum of oil prices is being restricted by a series of factors, and the resistance to the rise has become greater and greater.
“This week has been a good reminder to the oil market that oil prices are not only affected by supply and demand trajectories, but also by monetary policy forecasts and government intervention,” Rystad Energy Senior Oil Market Analysis Analyst Louise Dickson said: “Raising interest rates will further support the U.S. dollar and put greater downward pressure on oil prices.”
Looking ahead, Sycamore told reporters that what needs to be vigilant is , this is often the time of year when oil prices hit their peaks, so I don’t think it would be surprising if there was some overshoot in prices, and now we have gradually entered a period of seasonal weakening in oil prices. </p
