Bullish surprise, international oil prices soar!
Last night, international oil prices continued to rise, with U.S. oil rising by more than 3% and Brent oil rising by more than 2.8% during the session. As of this morning’s close, WTI September crude oil futures closed up 2.17% at $78.74/barrel, the highest since April 19, and Brent September futures closed up 2.06% at $82.74/barrel, the highest since April 24. The highest ever.
On the news, based on TASS and Reuters news, the Russian Energy Ministry said on Monday that Russia is considering limiting the number of companies exporting petroleum products to curb illegal exports of fuel to the domestic market.
“The establishment of a list of exporters is one of the measures under review. The Ministry of Energy will continue to work on preventing ‘grey’ export schemes,” the Russian Energy Ministry said.
Kommersant reported earlier that Russia was considering drawing up a list of approved refiners to crack down on so-called “grey exports” that subsidize domestic fuel.
Russian Deputy Prime Minister Alexander Novak supports the Energy Ministry’s proposal to limit the number of exporters of petroleum products, the Russian government said on Monday. At the same time, Novak ordered the Federal Antitrust Service and the Energy Ministry to continue working with oil producers to increase market sales of motor fuels, including on commodity exchanges.
In addition, Goldman Sachs expects record demand in the oil market to push oil prices higher in the short term.
“We expect a sizable supply deficit in the second half of the year and a close deficit in the third quarter as demand reaches record highs,” Daan Struvan, head of oil research at Goldman Sachs, told CNBC’s “Squawk Box Asia” on Monday. 2 million barrels per day.”
He added that the bank expects Brent crude prices to rise to $86 a barrel by the end of the year, from just over $80 currently.
He Han, a crude oil and refined oil researcher at Hengli Futures, believes that currently, with Saudi Arabia extending its production cut of 1 million barrels per day in July to August, the global crude oil situation will become even tighter in August. At the same time, with the recent sharp decline in Russian crude oil exports, the market is finally convinced that it will achieve the 500,000 barrels per day production reduction target promised in March. It has basically become the market consensus that crude oil will enter a destocking and tight situation in the next three to four quarters.
In terms of fundamentals, according to Li Jie, a senior researcher in the energy and chemical industry of CCB Futures, on the supply side, the situation in Libya has eased and domestic oil fields have gradually resumed production. According to market news, after the demonstrations last week, the Sharara oil field with a cash flow of nearly 300,000 barrels per day and the El Feel oil field with a capacity of 70,000 barrels per day resumed production one after another. Libyan supply returned to normal, leading to a certain degree of correction in oil prices. In addition, OPEC’s monthly report shows that all member countries’ production cuts were implemented in June. The output of the 10 member countries participating in the production reduction increased by 25,000 barrels per day month-on-month. Due to excessive production cuts in Angola and Nigeria, the output of the 10 member countries was 873,000 barrels lower than the quota. barrel/day.
In the United States, according to EIA data, U.S. crude oil production in the week ended June 30 was 12.4 million barrels/day, an increase of 200,000 barrels/day month-on-month, and production increased by only 200,000 barrels/day from the beginning of the year. Recently, the number of active drilling rigs in the United States is still on a continuous downward trend. As of the week of July 14, the number of drilling rigs was 537, a decrease of 3 units from the previous month and a decrease of 84 units from the beginning of the year. The number of fracturing fleets is 263, an increase of 5 from the beginning of the year. EIA expects U.S. crude oil production to average 12.56 million barrels per day in 2023, down 40,000 barrels per day from the June report.
In addition, in the July monthly report, both EIA and OPEC raised their global demand forecasts, while the IEA slightly revised down its demand forecasts. The impact on the balance sheet is limited, and there will still be significant destocking in the third quarter. The IEA predicts that demand in 2023 will increase by 2.2 million barrels per day year-on-year, with 90% of the increase coming from non-OECD countries. China’s year-on-year increase can reach 1.6 million barrels per day, accounting for 73% of the global increase. Due to lower than expected demand in some OECD countries, in the July monthly report, the IEA lowered its forecast for 2023 by 200,000 barrels per day. OPEC expects demand to increase by 2.4 million barrels per day in 2023, an increase of 100,000 barrels per day from the previous month. It is also an optimistic expectation for China’s demand. EIA expects crude oil demand to grow by 1.8 million barrels per day in 2023, an increase of 120,000 barrels per day from the previous month, of which China is expected to grow by 800,000 barrels per day. After this adjustment, EIA expects global crude oil inventories to continue to decline in the next five quarters.
In He Han’s view, the demand performance of downstream industries in the United States still shows no signs of recession. As can be seen from last week’s EIA data, demand for gasoline and diesel in the United States is strong. Even though U.S. refinery operations are operating at a high rate, reaching 94.3%, the highest level in the past four years, U.S. gasoline and diesel remain at seasonal lows, and diesel demand is optimistic. At the same time, distillate inventories in ARA, Singapore and Fujairah are also significantly below the five-year average level. Low global distillate inventories and better-than-expected demand performance have driven the cracking spread of downstream finished products to strengthen. Market trading logic began to shift from recession expectations brought about by weak manufacturing PMI to expectations of weak demand. After the bottom, the economic cycle switched to passive destocking, and the willingness of funds to enter the market to allocate more to distillate oil and other finished products gradually increased. The simultaneous strengthening of global finished product cracking will further support refinery profits, thereby supporting crude oil demand from the bottom up.
“From a price difference perspective, as production cuts continue, Russian exports decline and Saudi Arabia’s production cuts increase OSP, although India’s imports from Russia have been weakened and have turned…��Starting to purchase West African crude oil will weaken the total volume of West African oil flowing to Europe. However, overall, the tightening of the supply side and the strengthening of Asian refinery operations will further drive Brent-Dubai EFS to maintain weak operation or even explore negative conditions again. value. Until the export window from the Atlantic basin to Asia opens, the downside of its EFS is expected to be restrained to a certain extent. Overall, the pattern of ‘strong in the east and weak in the west’ will continue. “He Han said.
“According to IMF statistics, Saudi Arabia’s fiscal breakeven oil price in 2023 is US$80/barrel, and Iraq and Kuwait also hope that Brent can remain above US$70/barrel. If Brent crude oil falls back to around US$70/barrel later, The possibility of Saudi Arabia extending its production cuts again cannot be ruled out. Overall, after U.S. inflation fell below expectations in June, the market’s expectations for an interest rate hike within the year have become stronger. There are no new negative news on the macro front in the short term, and the impact on oil prices has weakened. . On the supply and demand side, two major oil fields in Libya that were affected last week resumed production one after another, and oil prices fell back slightly. However, OPEC production is strictly controlled, the United States increases production slowly, and Russian exports begin to decline. On the demand side, U.S. refined oil products continue to be destocked, and gasoline inventories are 5 It is the lowest in the same period of the year, and diesel inventory is also at a five-year low. The crack price difference between European and American refined oil products has also increased, and it is expected that short-term oil prices will continue to be strong.” Li Jie concluded.
In the short term, He Han said that small disturbances on the supply side still exist, and the weakness of Nigeria’s power infrastructure will increase the risk of crude oil supply interruptions, which will provide certain support for oil prices. However, the pace of China’s demand recovery will still be the main factor affecting the upward trend of oil prices. one. In the medium to long term, as crude oil enters a destocking cycle, any macroeconomic improvement that exceeds expectations or the risk of supply cuts will become its upward driver.