International oil prices rose more than 1% on the 4th, as the Organization of Petroleum Exporting Countries (OPEC) and other major oil producers expected to extend their production cuts. Analysts said that the current trend of international oil prices is mainly affected by changes in supply and demand fundamentals. The current level of international oil prices is moderate, the supply-demand relationship lacks new guiding factors, and oil prices may be consolidated for some time.
The price of light crude oil futures for April delivery on the New York Mercantile Exchange rose $0.79, or 1.42%, to $56.59 a barrel at the close of the day. London Brent crude oil futures for May delivery rose $0.60, or 0.92%, to $65.67 a barrel.
Russia’s oil minister, Nowak, said Russia would speed up production cuts, helping boost the market on the 4th. According to Reuters, Nowak said Russia planned to accelerate the pace of crude oil production reduction this month, reaching the level promised by the cut agreement by the end of March. Russia is OPEC’s largest non-member country ally. The report also said that OPEC and its allies may decide on a new production policy in June rather than at the Vienna meeting in April. According to sources, OPEC and its allies are expected to extend the cut-off plan at the June meeting, but the final decision will also depend on the extent of sanctions imposed by the United States on OPEC member states Iran and Venezuela.
At the end of last year, international oil prices fell to their lowest level in nearly a year and a half. Affected by OPEC output cuts and other factors, oil prices in New York and Brent crude oil prices rebounded sharply. On January 1 this year, OPEC and its allies began a new round of production cuts to avoid oversupply leading to lower oil prices. Non-OPEC oil-producing countries such as OPEC and Russia have agreed to cut production by 1.2 million barrels a day for six months.
In recent weeks, crude oil prices have continued to be supported by output cuts in OPEC and its partners. In February, crude oil supply in OPEC member countries fell to a four-year low as Saudi Arabia and other countries cut production and Venezuela’s oil industry was sanctioned by the United States. By February, OPEC had fully fulfilled its commitment to reduce production by 800,000 barrels a day compared with October last year, according to a Reuters survey. In addition, exempted oil-producing countries had voluntarily cut production by 900,000 barrels a day since October, bringing OPEC’s total output reduction to 1.7 million barrels a day.
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Not long ago, U.S. President Trump “shouted” to OPEC that international oil prices were too high, which led to a sharp drop in oil prices, but then quickly rebounded. Trump wants OPEC and other oil-producing countries to increase crude oil supply, but OPEC members led by Saudi Arabia disagree.
According to the Wall Street Journal, Saudi Arabia’s oil minister, Falkh, said OPEC may continue to cut production in the second half of this year. Oil producers need to be “calm” and “a long-term, cautious strategy” will avoid a global economic slowdown, Fallich said recently. As U.S. oil production and stockpiles remain high, Fallich said he tends to think production cuts may continue in the second half of the year.
In addition, to cut spending, the number of oil rigs that U.S. energy companies were looking for new reserves fell to the lowest level in nearly nine months last week. That factor is also helping oil prices recover.
However, analysts believe that the current level of international oil prices reflects the relationship between supply and demand in the market, and it is difficult to rise further before new stimulus factors emerge. Richard Gori, head of Asia operations at JBC Energy in Austria, believes that current oil prices are in a “pleasant” price range for both oil producers and consumers.
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Michel Kapadia, CEO of Sun Global Investment, believes that with oil prices rising, increased oil production by U.S. shale oil producers may put pressure on oil prices in the coming months.
Crude oil production in the United States and Canada has increased recently. The U.S. Department of Energy said it would release 6 million barrels of crude oil from its strategic oil reserve base in the near future.
At the same time, the demand for international crude oil has decreased due to the expansion of new energy applications and other factors. Relevant agency data show that the market demand in the United States has been sluggish at the end of last year. Gene McGillian, an analyst at Traditional Energy, said worries about slowing economic growth and reduced oil demand weighed on international oil prices.
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