In mid-May, international crude oil prices briefly surged and then fell again, with NYMEX WTI crude oil remaining at around US$70/barrel. Judging from the trends of all commodities, since April last year to the present, the rebound in international crude oil prices has been relatively minimal compared to the copper price, which also reflects economic prosperity. The price ratio between the LME’s three-month copper price and NYMEX WTI crude oil is at a historically high range. .
Crude oil price analysis and trend prediction
For future crude oil price trends , we believe that the driving force for continued sharp rise is fading, mainly due to the following aspects:
First, the momentum of U.S. economic recovery has slowed down. From the end of March to late May, the U.S. dollar index continued to fall. On the one hand, it had a lot to do with the release of liquidity by the U.S. Treasury Department, and the rise in U.S. bond yields had temporarily stopped; on the other hand, there was a long way to go with the economic recovery of the U.S. and non-U.S. countries. Big relationship. Since April, the epidemic in Europe has been well controlled, and Europe’s economic recovery has been stronger than that of the United States. Citigroup’s economic surprise index shows that as of May 24, Citigroup’s U.S. economic surprise index fell back to 11.3 points, while Citigroup’s European economic surprise index rose to 136.2 points, and the difference between the two dropped to -124.9 points.
The second is that the Federal Reserve may release a signal to reduce QE in advance due to the risk of high inflation and excessive speculation in the financial market. Merrill Lynch Bank of America said that core CPI experienced a sharp increase of 0.9% in April, but a large part of this increase can be explained by the temporary supply and demand imbalance. Although recent inflation expectations have been significantly overestimated, long-term indicators are still very close to the Fed’s policy. Target. Markets generally expect inflation to explode in the near term due to supply shortages, surges in demand from an open economy, and base effects, and the Fed may be concerned about higher indicators of inflation expectations.
On May 19, the minutes of the April FOMC interest rate policy meeting released by the Federal Reserve showed that not only one Federal Reserve official expected that the Federal Reserve would begin discussing cuts in the next few meetings. Code QE, some participating officials believed that if the economy continues to develop rapidly toward the FOMC committee’s goals, it may be appropriate to start discussing adjusting the pace of asset purchases at some point in the next few meetings. Although officials at the meeting believed that financial risks were generally stable, some officials pointed out that the “mortgage payment deferral plan” established during the epidemic may have concealed the vulnerability of American households and businesses. Many officials admit that low interest rates and highly loose financial conditions have been around for a long time, which may lead to a “pursuit of high yields” and thus negatively affect financial stability.
Third, the recovery of crude oil demand may also be slowing down, mainly reflected in the counterattack of the epidemic in India and other places. Data released by the U.S. Transportation Security Administration shows that the number of U.S. air travelers surged to 1.85 million on May 16, the highest number since March 2020, but it is still far lower than the same period in 2019. Japan’s air transport index shows that in March 2021, Japan’s air transport index only rebounded to 40.8 points, which was as high as 123.2 points in the same period of 2019. Among them, Japan’s air passenger transport index was only 29.1 points in March, and was as high as 125.2 points in the same period of 2019.
The latest report released by the IEA shows that global oil demand in 2021 is expected to increase by 5.4 million barrels per day year-on-year, a decrease of 300,000 barrels per day from the previous month’s forecast. The monthly report released by OPEC shows that global crude oil demand will increase by 6 million barrels per day in 2020, which is unchanged from last month’s forecast.
From the perspective of U.S. crude oil consumption, summer driving is the peak season for U.S. gasoline consumption, driving a seasonal increase in U.S. crude oil demand. Statistics found that from June to September 2019, the crude oil consumption in the U.S. transportation sector accounted for more than 70% of the entire U.S. crude oil consumption. When the epidemic was severe in 2020, it failed to reduce the proportion of crude oil consumption in the transportation sector to less than 70%. However, we are concerned that demand during this summer’s peak season will be lower than expected.
From an inventory perspective, as of May 14, U.S. crude oil commercial inventories were 486 million barrels, which had previously risen to over 500 million barrels in March. As consumption picks up, there has been some destocking, but the momentum of destocking has slowed down in May.
The picture shows the historical comparison of U.S. crude oil commercial inventories and NYMEX WTI crude oil prices
Fourth is global crude oil supply It is gradually recovering. On the one hand, OPEC crude oil production is rising month by month. As negotiations on the Iran nuclear deal proceed, the risk of production increases outside members of the OPEC+-bound alliance is rising. Regardless of when a new deal is reached, Iran has shown a fairly aggressive willingness to export. If the United States lifts sanctions, it could theoretically allow Iran to increase crude oil exports to 2.5 million barrels per day.
The IEA released its latest monthly report stating that in April 2021, global crude oil supply increased by 330,000 barrels per day to 93.4 million barrels per day. OPEC’s latest monthly report shows that OPEC crude oil production in April was 25.08 million barrels per day, an increase of 30,000 barrels per day from March. The EIA released a report stating that U.S. crude oil production rose to 1,100 barrels per day in April 2021. Crude oil production in the fourth quarter of 2021 is expected to be 11.3 million barrels per day. U.S. crude oil production is expected to be 11.8 million barrels per day in 2022.
On the other hand, U.S. shale oil production activities are also slowly recovering. As international oil prices gradually recover the ground lost due to the epidemic, the shale oil industry has gradually regained its former vitality. Shale oil producer Cabot Oil & Gas Corp. agrees to merge with Cimarex Energy Co. in a deal worth $7.4 billionThe U.S. dollar merger transaction will be completed entirely in shares. The U.S. Energy Information Administration said in its monthly forecast report that production from the seven major U.S. shale oil and gas producers is expected to increase by 26,000 barrels per day in June to 7.73 million barrels, the first increase in three months. The largest increase will come from the Permian, the largest oil-producing basin in the United States, where shale oil production is expected to increase by 54,000 barrels per day to 4.59 million barrels per day, the highest level since March 2020. In the week ending May 21, the number of active oil rigs in the United States increased by 4 to 356, and the total number of oil and gas rigs increased by 2 to 455, setting a record since April 24 last year.
CME Group OPEC Watch Tool
In view of the significant impact of OPEC supply side on international crude oil prices, investment Investors can use CME Group’s OPEC Watch Tool to estimate the probability of continued production increases released at the OPEC meeting in June. The CME Group OPEC Watch Tool is a tool that uses NYMEX WTI crude oil option prices to calculate the probability of a certain outcome at the next OPEC meeting. The probability is based on the performance of weekly and monthly options that expire before and after the OPEC meeting. size. As of May 25, the OPEC Watch tool calculated that the probability of OPEC+ keeping output unchanged was as high as 85.5%. </p
