On January 5, WTI crude oil broke through the US$50/barrel mark, starting an upward trend; on January 8, international oil prices climbed again. As of January 13, WTI crude oil was close to US$54/barrel, and Brent crude oil exceeded US$57/barrel. From a fundamental perspective, tightening supply is expected to provide strong support to oil prices for a period of time, but demand remains uncertain. Crude oil prices are expected to continue to oscillate on the strong side.
Expectations of tighter crude oil supply still exist
Since the remaining major oil-producing countries except Saudi Arabia have limited production growth in the foreseeable time, in Supported by Saudi Arabia’s additional production cut of 1 million barrels per day from February to March, the overall global crude oil supply margin has tightened.
As oil prices rebound, some U.S. shale oil companies have gradually increased spending, and the number of oil drilling rigs has gradually rebounded from 172 in mid-August 2020 to 275 in the week of January 8, 2021. Especially in the past 16 weeks ending in the week of January 8, there was only one small month-on-month decline. However, the decline in single-well output of new wells in most major shale oil producing areas has led to a rebound in U.S. crude oil production. In the four weeks from December 11, 2020 to January 1, 2021, U.S. crude oil production remained at 11 million barrels. /day.
In terms of OPEC+, according to OPEC monthly report data, from August to November 2020, OPEC’s overall production reduction implementation rate was above 100%; for December’s production reduction implementation rate, different agency data are slightly different, among which Petro-Logistics believes the implementation rate is 75%, and the Platts survey said the implementation rate is 99%. Taking into account the increase in production in Libya, the overproduction of non-OPEC countries such as Russia, and the failure to implement compensatory production cuts by oil-producing countries before, we believe that from December 2020 to December 2020, OPEC+ crude oil production will most likely exceed the requirements of the production reduction agreement, but the extent Not much. Saudi Arabia’s additional production cut of 1 million barrels per day from February to March will completely cover the negative impact caused by the previous insufficient implementation of OPEC+ production cuts.
We believe that global crude oil supply will remain tight in the short term. However, it should be noted that after the handover of US power on January 20, if Biden quickly lifts sanctions on Iran and Venezuela, judging from the recent statements of Iran’s NIOC and Venezuela’s PDVSA, it is likely that he will quickly remove crude oil within three months. When production returns to pre-sanction levels, global supply will directly face an increase of more than 2.5 million barrels per day, and the OPEC+ production reduction agreement may also expire early.
The prospects for U.S. economic recovery are optimistic
Although the global manufacturing industry continues to develop well and the GDP of major economies has improved year-on-year, the growth rate of global crude oil demand has not been the same. Not big. The current optimism in the market comes from good expectations for the prospects of U.S. economic recovery. On January 8, Biden publicly stated that he had discussed economic stimulus issues with U.S. House Speaker Pelosi and Senate Democratic Leader Schumer. After he officially took office A multi-trillion-dollar economic stimulus bill will be launched, and specific details will be disclosed on January 14. In 2020, the United States launched a total of 5 rounds of economic stimulus bills, namely US$8.3 billion on March 6, US$192 billion on March 18, US$2.2 trillion on March 25, and US$484 billion on April 23. , $2.2 trillion on December 29. Before these five rounds of economic stimulus bills were confirmed to be implemented, crude oil prices rose to a certain extent.
Since July 2020, the manufacturing PMIs of China, the United States, and the Eurozone have continued to be above the boom-and-bust line. The rising manufacturing boom has driven the recovery of crude oil demand. In the second and third quarters of 2020, China’s GDP growth turned positive year-on-year; in the second quarter of 2020, the US GDP growth dropped sharply by 31.4 percentage points from the previous quarter, while in the third quarter of 2020 it surged by 33.4 percentage points from the previous quarter; in the third quarter of 2020, the GDP growth rate of the Eurozone The year-on-year decline of 4.3 percentage points was also much better than the 14.8 percentage points year-on-year decline in the second quarter. In addition, the gradual decline in the total amount of global crude oil offshore floating storage and total OECD commercial inventories is also evidence of the growth in crude oil demand driven by the improvement of the global economy.
However, judging from the specific performance of global crude oil inventories, the improvement in real demand for crude oil may not be as strong as market expectations. In terms of OECD inventory, according to OPEC monthly report data, in October 2020, the total OECD inventory was 3.145 billion barrels, a decrease of 95 million barrels from the highest point in June 2020, and the destocking rate was less than 800,000 barrels per day. In the United States, as of January 1, 2021, although commercial crude oil inventories have dropped by 55.263 million barrels from the historical high level reached in June 2020, they are still at the highest level for the same period in history. In addition, the total inventory level of gasoline + refined oil + jet fuel + fuel oil has also remained above the 75% level since 2013. In terms of floating positions at sea, as of the week of January 1, 2021, global floating positions at sea were 91.418 million barrels, a decrease of 57.84% from the highest level in June 2020, but in absolute terms, it is still at 88% of the level since 2016 At or above the quintile level, the effect of removing floating positions in Asia is far worse than that in other regions of the world. This is also a major reason why the domestic price has continued to be weaker than the trend of Brent crude oil.
To sum up, while global supply remains tight in the short term and demand is likely to continue to recover thanks to the introduction of the US economic stimulus bill, crude oil prices remain stable. The probability of strong operation is higher. However, it should be noted that with the Democratic Party in the United States controlling both the Senate and the House of Representatives, it may be easier for Biden to fulfill his previous campaign promises. We need to pay attention to the risks of production growth in Iran and Venezuela, as well as the vigorous promotion of new energy in the United States. the risk of demand damage. </p
