This week, the crude oil market has returned to a calm market. The overall market fluctuations are not large, and the fundamentals and macro market are not large. The bright spots support the rise and fall of prices. It is precisely because of this that WTI positions have maintained an overall downward trend this week, showing that speculative funds are not interested in participating in the current market.
From a macro perspective, the market’s pricing of the US election has been completed, which can be regarded as a smooth transition in risk events, and crude oil prices have not experienced major fluctuations. Judging from foreign media reports, the market now has no objection to Biden’s election, and Trump can only make a final struggle. However, judging from Trump’s recent statements, he seems to be admitting the fact of defeat. In this lean period, it is not yet time for Biden to implement his governing agenda, and the economic stimulus plan cannot be implemented. Therefore, hoping that the United States will continue to release water to push up oil prices will be difficult to achieve in the short term, at least until The first quarter of next year.
However, looking at the current state of the United States, until Trump and Biden fully clarify the ownership of power, American society will continue to be divided. Foreign media said Trump’s supporters and Biden’s supporters have had large-scale conflicts more than once. We still don’t know whether this conflict will escalate. Therefore, we also need to pay special attention to this incident.
Basically, Asia’s global purchasing power has risen again. Backed by next year’s crude oil import quotas, buyers led by China have once again set off a wave of global purchasing. Libya’s increased crude oil production capacity has also It was digested instantly. Therefore, there is no obvious oversupply situation in the fundamental market, and the stable state of supply and demand balance is still maintained.
In the production reduction alliance, there is already news that OPEC+ internal discussions may postpone the current production reduction quota for three months, which means that OPEC+ will not start increasing production immediately after entering 2021. pace. However, oil-producing countries troubled by fiscal deficits are also having a hard time. Low oil prices have coupled with production cuts. This year’s fiscal revenue is far less than before. In addition, the fermentation of the epidemic is also a consumption of national resources. The United Arab Emirates has already had the idea of withdrawing from the production reduction alliance. .
The UAE’s withdrawal from the production reduction alliance is very negative news, although it is still only at the verbal stage. Among the entire production reduction alliance, the UAE’s crude oil production ranks fourth and third among OPEC countries, at 2.44 million barrels per day. In the production reduction agreement, the UAE’s current crude oil production has dropped by 727,000 barrels per day compared with the production reduction benchmark. The production reduction is quite large. If the UAE withdraws from the production reduction alliance, it means that a large amount of production capacity will be put on the market.
With the strong support of Saudi Arabia and Russia, OPEC+ has always given people an impression of stability and unity. Under the pressure of fiscal revenue, if the UAE considers withdrawing from the group, then other oil-producing countries will inevitably This idea will also come up, which will bring certain troubles to OPEC+’s future support market. Even if the United Arab Emirates does not withdraw from the group, once the price rises to a certain level, will the “hungry tigers” who see meat encounter the prisoner’s dilemma again and increase production one after another. These are supply-side disturbances to the future market. Therefore, it can be expected that before there is no substantial improvement in demand, the supply side can only stabilize the Brent price in the range of 40-50 US dollars per barrel. If it is below US$40/barrel, the supply-side support will appear; if it is above US$50/barrel, the supply-side prisoner’s dilemma will appear. Only when the demand side truly improves will this supply-side vicious circle be broken. For a long time to come, investors will most likely continue to tolerate such low volatility and range-bound conditions.
Vaccine stimulus remains at the expected level
As of Friday, there were 640,000 new confirmed cases worldwide, bringing the total number of confirmed cases to 57.25 million. Among them, there were 107,000 new confirmed cases in Asia, 252,000 new confirmed cases in Europe, 13,000 new confirmed cases in Africa, and 270,000 new confirmed cases in the Americas. The main outbreak areas are still concentrated in Europe and America. In terms of countries, the number of new cases in the United States in a single day hit a record high, the United Kingdom added 23,000 new cases in a single day, France added 21,000 new cases in a single day, and India added 46,000 new cases in a single day. Except for the United States, other The number of new cases in the country seems to be stabilizing and not continuing to surge.
The current market has very high expectations for vaccines. Only a vaccine can completely end the tepid crude oil market and provide possible upside space for oil prices. However, the current market response to the vaccine is still at the expected level. Only after it is truly implemented and stimulates demand to recover, can we see the market truly improve.
�There has been rapid growth, but considering the withdrawal of old wells, the output in the Bakken area still declined significantly. The situation in the Eagle Ford area and the Permian area is similar to that in the Bakken area. The increase in single well production has made up for the decline in the number of drilling rigs, thus maintaining the production decline in a relatively stable range.
We can also draw another conclusion from this idea. Once the oil price exceeds 50 US dollars per barrel, the prisoner’s dilemma on the supply side will not only be within OPEC+, but also OPEC+ and other oil producers. The competition between them has further aggravated the uncertainty on the supply side, so the demand side needs to provide strong support.
In summary, In the coming period, crude oil prices will still oscillate in the range of 40-46 US dollars per barrel. If the market falls below US$40/barrel due to the impact of sentiment, strategic bottom-hunting investors can still actively make plans; if crude oil prices strongly exceed US$46/barrel or even return to above US$50/barrel, in the absence of demand-side support, If the price goes down, the foundation of oil prices will be very unstable. Therefore, maintain long-term operations on dips and do not recommend chasing highs.
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