Oil prices gave up last week’s gains this week and recovered some of their losses. The U.S. index fell sharply at the beginning of the week, pushing U.S. oil to a new monthly high. However, the epidemic situation in India was severe, and European and American stock markets fell collectively, triggering a plunge. Coupled with expectations of a fourth consecutive decline in U.S. crude oil inventories and the progress of Iran nuclear negotiations exceeding expectations, oil prices rose above expectations during the week. Continued pressure. The unexpected drop in Libyan production and the easing of the epidemic situation in Europe and the United States provided support. In the later period, we will focus on the epidemic situation and marginal changes in supply.
The epidemic situation is serious
Get Thanks to the active advancement of vaccination, the epidemic situation in the UK has improved recently. The latest official data shows that 63% of adults in the UK have received at least one dose of vaccine, and 21% have completed two doses; among about one million people tested every day, the number of confirmed cases is only a few thousand, significantly reducing the number of deaths. rate, it is expected that the number of new deaths in a single day will approach zero in the near future.
Despite this, the current global epidemic situation is still severe, with the number of new confirmed cases rising for eight consecutive weeks. Among them, the one that most affects the market is India, the third largest global oil importer. India did not implement a nationwide blockade for the sake of its economy. On the 14th of this month, the number of new confirmed cases in the country exceeded 200,000 in a single day for the first time and has continued to surge since then, setting a new record again this Friday. The United States’ export restrictions on vaccine raw materials have greatly affected the world’s largest vaccine producer, and the vaccine shortage has made the epidemic in India worse. Generally speaking, the epidemic situation in various countries has gradually diverged due to differences in vaccination progress, effectiveness of blockade measures, and medical and health systems. However, the overall situation remains severe. Among them, the uncontrollable epidemic in India will become a haze hanging over the oil market in the near future.
Supply is highly variable and unpredictable
Early month The OPEC+ ministerial meeting released output adjustment policies for the next quarter and actively guided market expectations. However, supply-side uncertainties occurred frequently this week.
First of all, negative expectations for Iran’s oil supply to flow back to the market have increased. On the 21st, Iranian President Harouni said that 60%-70% of the negotiations on the Iran nuclear agreement were completed. The next day, people familiar with the matter revealed that Biden The government is willing to ease sanctions on key areas of Iran’s economy, including oil and finance. The market reaction to this news was once optimistic. However, because the US-Iran relationship has been in a stalemate for too long and has large differences, whether it is the lifting of more than 1,500 economic sanctions against Iran, the freezing of US$15 billion in overseas assets, or the 2 million barrels/day of crude oil, It is difficult for all supply increases to be realized in the short term.
Secondly, due to factors such as unrest and economic difficulties, AGOCO, a subsidiary of the Libyan National Oil Company, suspended production, causing the country’s daily crude oil production to drop by 300,000 barrels to 1 million barrels. While there is a short-term boost to the market, the duration of this benefit will depend on when the Libyan National Oil Company receives budget allocations.
Finally, the OPEC+ ministerial meeting originally planned for April 28 may be canceled due to the majority of alliance members celebrating the Islamic holy month of Ramadan, a signal that the production adjustment plan agreed at the beginning of the month will not There are significant changes and despite the uncertainty, a final decision will be revealed by next week at the latest. In contrast, it is more difficult to predict when the positive expectations for Libyan crude oil supply will be withdrawn and the negative expectations for Iranian crude oil supply will be realized.
Overall, the slow recovery in demand and continued tight supply determine that the oil market is still in the channel of destocking. In the medium to long term, with the advent of summer and the increase in the global vaccination rate, coupled with the seasonal increase in U.S. refinery operating rates, oil prices are likely to trend stronger. But in the short term, although the decline in Libyan crude oil supply offsets the drag on demand caused by the epidemic situation in India, the rebound in Iranian supply has become the “Sword of Damocles” for the oil market bulls. Demand cannot keep up with supply growth, and oil prices may be at risk of falling again.
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