Multiple factors have caused oil prices to fall in the near future: First, the escalation of trade frictions initiated by the United States has triggered concerns about the global economic slowdown and the impact on crude oil demand. Second, the monthly report of the Organization of Petroleum Exporting Countries (OPEC) lowered its forecast for global crude oil demand next year. Third, the demand for crude oil in Asia has declined. Fourth, US crude oil inventories and production both increased, while refined oil and inventories also rose sharply.
Affected by the depreciation of emerging market currencies and trade tensions, the global economic outlook is uncertain and dragged down demand for crude oil, and international crude oil prices have fallen under pressure. Last week, New York West Texas Intermediate crude oil futures fell for the seventh consecutive week, down 2.7%, the longest losing streak since 2015; London North Sea Brent crude oil futures fell for the third consecutive week, a decline of 1.4%.
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The analysis believes that multiple factors have caused oil prices to fall under pressure: First, the escalation of trade frictions initiated by the United States has triggered concerns about the global economic slowdown and the impact on crude oil demand. Trade frictions have been putting pressure on the market in the past few months. Trade friction between the United States and China has made investors feel uneasy. Last week, the diplomatic relations between the United States and Turkey deteriorated, the high tariffs between the United States and Turkey, and the sovereign currency crisis in Turkey continued to ferment, raising international community concerns about the instability of emerging markets. Market risk aversion has risen sharply, and global stock markets and commodity markets have complained. If the situation in Turkey deteriorates further, it will threaten to exacerbate currency fluctuations and capital outflows in emerging market countries, further increasing the value of the US dollar and thus lowering oil prices.
Second, the monthly report of the Organization of Petroleum Exporting Countries (OPEC) lowered its forecast for global crude oil demand next year. OPEC’s latest monthly report on the crude oil market shows that demand for OPEC crude oil is expected to be 32.05 million barrels per day in 2019, a decrease of 130,000 barrels per day from the previous month. In 2019, global crude oil demand growth is expected to be lowered to 1.43 million barrels per day, with a previous value of 1.45 million barrels per day. At the same time, the monthly report raised the daily average crude oil supply of non-OPEC countries by 30,000 barrels to 2.13 million barrels. The monthly report also showed that OPEC’s daily output increased by 41,000 barrels to 32.32 million barrels. Among them, Saudi Arabia’s oil production in July was 10.28 million barrels, a decrease of 200,000 barrels from June. Saudi Arabia said that the cut was mainly due to increased production by competitors, and Saudi Arabia hoped to avoid another oversupply.
Third, the demand for crude oil in Asia has declined. According to shipping data, the annualized growth rate of demand in China, India, Japan and South Korea has dropped from 3.5% in 2016 to around 2% today. Among them, China’s largest crude oil importer China and India’s imports in July fell by about 500,000 barrels from the January-June average of 12.4 million barrels per day. The market generally believes that if trade disputes and emerging market turmoil lead to further deterioration of the global economic outlook, Asian oil demand will continue to weaken.
Fourth, US crude oil inventories and production double growth, while refined oil and inventories also rose sharply, so oil prices fell sharply. According to the latest inventory report of the US Energy Information Administration, as of the week of August 10, US crude oil inventories unexpectedly increased by 6.8 million barrels to 414 million barrels, the largest weekly increase since the week of March 10, 2017. It is estimated to be reduced by 2.5 million barrels. More data showed that crude oil inventories increased by 1.64 million barrels last week, the largest increase since the week of April 6; refinery crude oil processing volume increased by 383,000 barrels per day to 17.89 million barrels per day, a record high. In addition, last week, US domestic crude oil production increased by 100,000 barrels to 10.9 million barrels per day.
Obviously, negative sentiment will continue to pervade, and international crude oil prices will remain weak and weak in the short term. But in the long run, the US government will fully resume sanctions against Iran and sharply squeeze Iranian crude oil exports, which will lead to further tightening of global supply. The international crude oil market price may be supported.
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