The highs have fallen continuously, are institutions actively optimistic about oil prices?

After rising for 7 consecutive weeks, oil prices finally ushered in a correction week. In the past week, negative macroeconomic conditions suppressed the performance of risk assets…

After rising for 7 consecutive weeks, oil prices finally ushered in a correction week. In the past week, negative macroeconomic conditions suppressed the performance of risk assets. Risk appetite in global financial markets has cooled significantly. Stock markets in core economies have fallen significantly. The center of gravity of oil prices has also fallen continuously. With the recent rapid growth in U.S. crude oil production, WTI crude oil has become the oil type with the largest decline in the past week, once falling below 80 US dollars per barrel, and retreating from a high of nearly 6 US dollars per barrel. However, as the demand for adjustment has been released to a certain extent, oil prices have also stabilized. After receiving support in the last two trading days, they began to oscillate and rebound. SC crude oil has been significantly stronger than the European and American markets since August. It has been particularly strong during the recent adjustment period of European and American oil prices. In particular, the near-month contract price is significantly higher than its theoretical pricing. This performance is based on the increase in supply after OPEC+ continues to deepen production cuts. End tightening brings about phenomena. In the past period, the RMB exchange rate has continued to rise, SC crude oil futures warehouse receipts have fallen rapidly, and China’s processing volume has continued to hit a three-year high. A series of factors have resonated and promoted SC crude oil to strengthen significantly.

During the oil price adjustment stage, the refined oil cracking spread and the monthly crude oil market spread have fluctuated, but overall they are still relatively strong, which shows the resilience of oil prices in the adjustment stage. This was also reflected in the monthly reports released by major core institutions in the previous week. It can be reasonably interpreted that more and more institutions have consistent expectations for the supply and demand aspects of the crude oil market’s continued destocking due to supply shortages in the second half of the year, which will allow oil prices to remain relatively resilient in the coming period. Although the oil price correction last week has cooled the oil market, most institutions are still relatively optimistic about the overall outlook for oil prices, believing that there is still room for oil prices to rise in the second half of the year. Obviously, this is a basic judgment based on the tight supply of the crude oil market in the context of current production cuts. .

In the short-term energy outlook released by the U.S. Energy Agency on August 8, its domestic crude oil production was significantly increased to 12.76 million barrels per day, an increase of 200,000 barrels per day from the previous period. Among them, the retrospective increases in production in May, June, and July were 100,000 barrels/day, 210,000 barrels/day, and 260,000 barrels/day respectively. The average increase in production expectations from August this year to the end of 2024 is also close to 30 Thousands of barrels/day. In order to correspond to its adjusted production expectations, in the past two EIA weekly reports, the single-week production data released by EIA jumped by 400,000 barrels/day and 100,000 barrels/day respectively. Such data adjustments are quite significant as OPEC+ deepens production cuts. intention. The number of rigs drilling in the United States fell by 12 in the week ended August 18, indicating that oil and gas producers are still curbing drilling activity despite a recovery in oil and gas prices. So far this year, the rig count has dropped 17% to 642. Institutional land drilling industry models indicate that 700 rigs will be in service by the end of 2023, meaning trends will stabilize by the end of the third quarter and begin to recover in the fourth quarter. In addition, another factor of concern on the supply side is Iran’s recent positive production increase information. According to Iran’s Mahr News Agency, Davoud Manzour, head of Iran’s National Planning and Budget Organization, said that Iran exports more than 1.4 million barrels of oil per day. Manzour said Iran’s crude oil exports have exceeded the country’s budgeted levels through March 2024, but did not provide exact figures. Earlier, Iranian media reported on Saturday that Iranian Oil Minister Javad Owji said that the country’s oil production will increase by 110,000 barrels per day to 3.3 million barrels by August 22, and Iran hopes to increase its oil production by the end of September. to 3.5 million barrels per day.

Although the International Energy Agency (IEA) states that the United States will push for an increase in non-OPEC+ oil production by 1.9 million barrels per day to make up for the supply losses caused by OPEC+ production cuts as much as possible, relative to the full-year growth in demand, crude oil prices in the second half of 2023 There will still be significant destocking in the market. The latest EIA report showed that commercial crude oil inventories excluding strategic reserves fell by 5.96 million barrels to 440 million barrels in the week of August 11, a decrease of 1.34%. Crude oil inventories in Cushing, Oklahoma -837,000 barrels, compared with the previous value of 159,000 barrels. U.S. Strategic Petroleum Reserve (SPR) inventories increased by 600,000 barrels that week to 348.4 million barrels, an increase of 0.17%. In the week of August 11, EIA refined oil inventories were 296,000 barrels, compared with expectations of -473,000 barrels and the previous value of -1.706 million barrels. Gasoline inventories -261,000 barrels, expected -1.26 million barrels, previous value -2.661 million barrels. Heating oil inventories -101,000 barrels, compared with the previous value of 166,000 barrels. Judging from EIA data, full-caliber inventories have maintained continuous destocking performance, and the pressure on crude oil and gasoline and diesel inventories is relatively small. On the demand side, the Chinese and U.S. markets remain strong. The operating level of U.S. refineries has reached the highest level since January 2020, while China’s crude oil processing volume has continued to hit a three-year high. This performance also provides conditions for the continued strength of oil prices. .

The latest position data shows that as of the week of August 15, speculative net long positions in WTI crude oil futures decreased by 28,752 lots to 149,939 lots. As U.S. production rebounded, funds reduced their net long positions in WTI crude oil, but their net long positions remained at��The year’s high, but in the process of oil prices rising and falling in the past week, funds have continued to increase their net long positions in Brent crude oil. The latest speculative net long position in Brent crude oil futures increased by 19,748 lots to 230,735 lots, which sent a very clear signal to the market. Institutions have maintained relatively optimistic expectations for the crude oil market as a whole in the second half of the year. Although macro-level shocks will appear from time to time, which will cause oil prices to go out of the adjustment market, there is certainty in the tightening of supply. Against this background, the overall strong pattern of oil prices is difficult to shake. In the short term, after the continuous decline of oil prices from high levels, the demand for adjustment has been released to a certain extent. There is little risk that oil prices will continue to fall sharply. Oil prices began to oscillate and rebound on Thursday night. It is expected that there will be a tug of war in the current area, allowing investors to re-evaluate oil prices. In the next running interval, pay attention to the rhythm.

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Author: clsrich