Supply and demand patterns continue to improve, and oil prices are expected to continue to climb

Recently, crude oil futures in both internal and external markets continue to rise in tandem. Domestic crude oil futures, NYMEX crude oil futures and Brent crude oil main contracts have reached new highs since November 2018. Analysts said that macro-level and basic-oriented support short-term crude oil prices to maintain a strong trend. In the second quarter, although the game between Saudi Arabia, Russia and the United States on oil market will intensify, OPEC + production reduction action is not expected to change significantly. The supply and demand pattern of the crude oil market will continue to improve, which is expected to support the further upward movement of the oil price center.

Internal and external discs have reached a new high

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On April 3, the main 1905 contract of domestic crude oil futures reached a maximum of 475.5 yuan/barrel, a new high since late November 2018, closing at 472.4 yuan/barrel, up 1.26%. As of that day, the main contract of NYMEX crude oil futures reached a maximum of 62.99 dollars/barrel, a new high since November 8, 2018; the main contract of Brent crude oil reached a maximum of 69.96 dollars/barrel at one time, which was the highest since November 13, 2008. New high.

On the one hand, the ISM manufacturing index of the United States was higher than expected in March, while the PMI of China’s Caixin manufacturing industry hit an eight-month high in March, according to Li Yanjie, an analyst at CITIC Construction Investment Futures. The expansion of China’s and the United States’manufacturing industry has cooled global crude oil demand worries. On the other hand, the Reuters survey shows that OPEC’s implementation rate of output reduction is expected to be 135% this year and 101% in February, and OPEC’s oil production is expected to decrease by 280,000 barrels per day to 30.4 million barrels per day in March, the lowest level since 2015. In addition, the Jose oil terminal in Venezuela was suspended due to insufficient electricity supply. Macroscopic and basic orientation support short-term crude oil prices to maintain a strong trend.

Zang Gali and Xu Lin, energy and chemical researchers at Sinda Futures, said that despite differences between Saudi Arabia and Russia in reducing production, US President Trump again used Twitter to pressure OPEC, but it is not expected that significant changes will occur before the Vienna Conference in late June.

De-stocking of crude oil will accelerate

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Looking ahead to the fundamentals of the oil market in the second quarter, Zang Jiali and Xu Lin believe that because Saudi Arabia has exceeded the cut-off quota and has limited space for further reduction, the action of reducing oil production in the second quarter will continue to advance steadily, but the boost to oil prices will be weakened. In addition, as a leading indicator of crude oil production, the number of active oil drilling rigs in the United States has fallen to the lowest level in a year, and the growth rate of crude oil production in the United States will continue to slow down in the second quarter, and even there may be a slight negative growth.

Regarding the geo-situation, the above-mentioned analysts said that Venezuela’s domestic situation is still unclear and the geo-situation risks remain. Venezuela’s crude oil production in the second quarter may continue to decline after a brief recovery, subject to U.S. sanctions. On the Iranian side, the strategic goal of reducing Iranian oil exports to zero is not in the immediate interests of the United States. The Iranian sanctions issue will probably make a smooth transition, that is, to extend the exemption period while maintaining or slightly reducing the existing exemption.

Overall, the oil market game between Saudi Arabia, Russia and the United States will intensify in the second quarter, but OPEC + production cuts are not expected to change significantly. The focus of the crude oil market is still on the supply side. The consumption of refined oil, especially gasoline, is better than expected, and the de-stocking process of global crude oil is expected to accelerate. The supply and demand pattern of the crude oil market in the second quarter is expected to continue to improve, which will further support the upward movement of the oil price center. The target price of NYMEX crude oil will be raised to $67 per barrel, Brent crude oil to $75 per barrel and domestic crude oil to $500 per barrel.

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