On Monday, June 8, Beijing time, the U.S. WTI crude oil and Brent crude oil prices in the day exceeded $40 / barrel and $43 / barrel respectively. Previously, since April 22, the international oil price has been in the upward cycle for six consecutive weeks, and WTI has increased by more than 200%. Why is the price of oil advancing with great momentum under the background of the pressure of supply and demand and the fact that the epidemic has not been completely controlled?
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To make this clear, first of all, we have to start with the production reduction policy of the OPEC + oil production alliance led by Saudi Arabia and Russia. Undoubtedly, the active production reduction of oil producing countries has contributed indelible power to the “recovery from the dead” of oil prices. OPEC + cut production by a record 9.7 million barrels per day in May, a record that had been set until the end of June. However, on July 7, at the OPEC + ministerial video conference, the market was reassured by the results, and OPEC agreed to extend the measures to reduce production by 9.7 million barrels / day for one month until the end of July. At the same time, countries that fail to achieve a 100% reduction in production between May and June will need to compensate between July and September. Oil prices did not disappoint oil producing countries, and prices rose by waves. Obviously, in the face of balancing the new supply and demand pattern of the oil market, OPEC + has the best credit. Coincidentally, on June 7, it was reported that Saudi Arabia increased its crude oil export price significantly to warm up the oil market. Since June 7, Saudi Arabia’s official price of various crude oil exports from various regions has increased significantly. Saudi Aramco raised the price of all grades of crude oil to Asia by $5.60- $7.30 per barrel in July. OPEC + oil producing countries cut production for a record period of time, Saudi Arabia’s crude oil export price increased, many factors pushed the crude oil price to above $40.
The supply of global oil market is decreasing, and the problem of exhausted storage capacity is not a problem. The “sword of Damocles” that hung above the head of the world’s oil price has been removed. The latest U.S. inventory data also encouraged market confidence again. The EIA released data showing that the inventory of crude oil depots decreased by 2077000 barrels in the week of May 29, with a previous increase of 7.928 million barrels and an expected increase of 3.038 million barrels. In addition, the level of active drilling rigs in the United States continues to decline, Baker Hughes) last Friday reported that in the week of June 7, the number of oil and gas drilling platforms in the United States fell by 17 again, to 284, a total decrease of 691 compared with the same period last year, which is also the lowest record this year. As a result, the data showed that the oil production in the United States fell again, with an average of 11.2 million barrels / day in the week to May 29, down 1.9 million barrels / day compared with the highest level in history, compared with the same period last year Down 200000 barrels / day. This is the ninth consecutive week of decline in production. The decline in US crude oil production has also contributed to the rise in oil prices.
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In addition to the positive supply side, the significant positive non-agricultural data of the United States in May ignited the market enthusiasm. Facts have proved that the demand side of crude oil is also improving. Although the current epidemic is not completely controlled, the pace of economic restart in the world has not stopped. Especially in Europe and the United States, the restrictions are gradually lifted, and the fuel demand is obviously picking up, which provides a strong support for oil prices 。 In addition, China’s demand growth is particularly eye-catching. The latest data shows that China’s crude oil import in May broke the historical record. China’s crude oil import in May increased by 15% compared with April, reaching 47.97 million tons. That’s 11.34 million barrels a day, up 15% from April, the largest monthly import volume on record. With the operation of domestic enterprises gradually returning to normal, China’s manufacturing production has rebounded for three consecutive months month on month. It can be said that the strong recovery after China’s economic epidemic has also opened up some demand for the global oil market.
Although the oil price continues to rise, like a runaway wild horse, in addition to the improvement of the supply and demand side, it also does not exclude the factors of market speculation. Maybe WTI is at the threshold of $40, and will continue to be tested later. In addition, there are some worries about the rise of oil prices. In addition to the impact of the epidemic, although there are data indicating the decline of crude oil inventory in the United States, there is a sharp increase in refined oil products. EIA data shows that in the recent week, the gasoline inventory in the United States increased by 2.796 million barrels, with a previous value of 724000 barrels, with an expected increase of 1 million barrels; refined oil inventory increased by 9.935 million barrels, with a previous value of 5.495 million barrels, with an expected increase With an increase of 2.686 million barrels, it can be seen that the increase of refined oil storage is more than expected, indicating that the current demand is still not optimistic, which will also become a stumbling block for the further rise of oil prices. On the whole, oil prices may be more volatile in the near future, not excluding the possibility of short-term price correction.
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