Active production cuts by oil producing countries, passive production cuts by Iran and Venezuela, slowdown of upstream investment in shale oil in the United States and increase of seasonal demand have pushed oil prices upward continuously. However, with the tightening of supply in the first quarter and the gradual realization of hedging and release of pipeline capacity, the upward resistance of oil prices will increase in the latter part of the second quarter.
OPEC output continued to decline
| Sodium selenite |
In February, OPEC crude oil production fell to 30.549 million barrels per day, a new low in the past four years. The implementation of production reduction in major oil producing countries has led to a significant decline in OPEC crude oil production. From the implementation of production reduction in oil-producing countries, the implementation rate of production reduction in January and February this year reached 86% and 106%, respectively. Saudi Arabia and Kuwait, the major oil-producing countries, maintained a high implementation rate of production reduction. Under the framework of active output reduction, Venezuela and Iran’s output also declined passively due to the sanctions imposed by the United States. Venezuela’s crude oil production has fallen by more than 1 million barrels per day in the past two years, falling to 500,000 barrels per day in March due to the paralysis of its domestic power system, and its crude oil exports to the United States dropped to 0 in mid-March. In addition, Iran’s output and exports have continued to decline since the United States resumed sanctions against Iran in November last year. Iran’s crude oil production fell to 2743,000 barrels per day in February this year, the lowest level in the past five years. Since November last year, Iran’s exports to Europe, South Korea and other places have all dropped to 0. At present, only a few countries such as China and India are exporting, and the export volume is also gradually declining.
Upstream investment in shale oil in the United States slowed down
Recently, the growth of crude oil production in the United States has slowed down. The number of active drilling rigs in the United States has declined in the past year or so. Especially since the end of last year, the total number of active drilling rigs in the United States has declined due to the drop in oil prices. It dropped to 824 in the week of March 22, down 64 from the high at the end of last year. According to the time when the oil price of drilling rigs lags for about 4 months, the data of drilling rigs will continue to weaken in the next 1-2 months. 。 Meanwhile, in the data of seven major shale oil producing areas in the United States, the number of drilling wells has fallen in recent months, which is directly related to the decline in the number of drilling rigs. Permian Basin, the largest shale oil producing area in the United States, has been declining in single well production for nearly a year, which means that the efficiency of shale oil wells in the region is declining, and with the decline of the growth rate of production in the region, more drilling investment may be needed to maintain production in the future. At the same time, higher requirements are put forward for the cost of shale oil production, and shale oil enterprises may have to lead to the future. Efforts should be made to reduce mining costs.
| EDTA 2Na |
US demand will increase seasonally
Since mid-February, refinery activity in the United States has been gradually active, refinery start-up rate and crude oil processing volume have been rising, and the import of refineries in the United States has increased seasonally, which will lead to the de-stocking of crude oil. In the past month, U.S. crude oil stocks have fallen by about 15 million barrels a day, and the speed of de-stocking has accelerated. Inventory reports for the week of March 22 were affected by a chemical tank fire in the Houston Channel of the United States. Refinery start-up declined by 2.3% and crude oil stocks increased by 2.8 million barrels. However, we believe that this is only a short-term disturbance and that refinery activity in the United States will continue to rise in the second quarter.
U.S. crude oil capacity is expected to be released in the second half of the year
In 2018, inadequate pipeline capacity in North America led to the accumulation of regional stockpiles of crude oil, and led to a sharp rise in WTI-Midland and WTI-WCS price spreads, but since then, with the increase of pipeline capacity, the current price spreads have returned to a reasonable level. However, this does not mean that crude oil pipeline capacity can meet the demand. According to OPEC statistics, the Permian crude oil production in the main shale oil producing areas of the United States has exceeded 3.7 million barrels per day, and exceeded the pipeline capacity of the area, which to some extent limits the growth of production in the region. According to the new pipeline plan of the United States, the new pipeline plan of the United States from 2019 to 2020 is expected to be 5.960 million barrels per day, and the new pipeline capacity from Permian to the Bay Area in 2019 will reach 1.925 million barrels per day, most of which will be put into operation in the second half of this year, which means that the inventory pressure of the Permian Basin will be eased in the second half of this year.
| Azodicarbonamide (AC foaming Agent) |