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US CIA director visits Saudi Arabia! Saudi Arabia raises prices again, is $100/barrel crude oil not a dream?

According to the latest report from Reuters last night, a U.S. official said that CIA Director William Burns held talks with the head of the Saudi intelligence service and national…

According to the latest report from Reuters last night, a U.S. official said that CIA Director William Burns held talks with the head of the Saudi intelligence service and national leaders in Saudi Arabia to reaffirm intelligence cooperation.

According to the report, some experts believe that China has previously helped Saudi Arabia and Iran restore diplomatic relations, and that coupled with the tension between Washington and Riyadh over a series of issues such as human rights and oil production cuts, many factors indicate that the United States’ influence on Saudi Arabia has declined.

“Director Burns traveled to Saudi Arabia to meet with intelligence community and national leaders on issues of mutual interest,” said the U.S. official, who spoke on condition of anonymity.

“The director reinforces our commitment to intelligence cooperation, particularly in the area of ​​counterterrorism,” the official added.

Saudi Arabia raises official selling prices for all oil sales to Asian customers in May

On Wednesday local time, Saudi Arabia, the world’s largest exporter, raised the official selling price (OSP) of oil sold to Asia in May, just days after OPEC+ members led by the country collectively announced production cuts.

Saudi Aramco has raised the price of its flagship oil, Arabian Light, for export to Asia in May by 30 cents/barrel from April, a premium of $2.80/barrel to the regional benchmark Dubai/Oman crude oil. , raising prices for the third consecutive month.

Saudi Arabia also increased the official selling prices of Arabian Medium crude oil and Arab Heavy crude oil sold to Asia in May by 30 cents and 50 cents respectively, which have a higher sulfur content than Arab Light crude oil.

At the same time, the official selling price of Saudi oil sold to the United States also increased slightly. The price of Saudi oil sold to northwest Europe and the Mediterranean region remained unchanged.

Will oil prices continue to rise? Wall Street Analyst: $100/barrel is not a dream

After OPEC+ announced a production cut, the bullish sentiment in the crude oil market increased significantly. Investment banks have raised their oil price expectations. Most Wall Street analysts have become significantly more optimistic about oil prices. They are bullish that Brent oil will reach US$100/barrel and believe that oil prices will remain stable after production cuts. Overshoot risks, while downside risks are limited.

Goldman Sachs analysts Daan Struyven and Callum Bruce believe that OPEC+ has very large pricing power compared with the past. Today’s unexpected production cuts are in line with the group’s new doctrine of pre-emption, which allows them to act without significant losses in market share.

Goldman Sachs raised its forecast for Brent crude oil prices at the end of 2023 to US$95/barrel from the previous US$90/barrel, and raised its forecast for Brent oil at the end of 2024 from US$97/barrel to US$100/barrel. Goldman Sachs pointed out in its latest report that credit tightening caused by banking turmoil will bring risks to U.S. oil capital expenditure and supply. Once the banking crisis deepens, the indirect impact on crude oil supply will be greater.

Daniel Hynes, senior commodities strategist at ANZ, shares the same view. He believes oil prices could reach $100 per barrel before the end of this year.

Bjarne Schieldrop, chief commodities analyst at Nordic Bank in Sweden, believes that as the growth of U.S. shale oil production slows down, OPEC+ will have greater market power and higher oil prices. Along with the recovery in global jet fuel demand, production cuts will help push Brent oil back to the $100/barrel level faster.

In this regard, Dong Dandan, chief researcher of CITIC Energy, said that OPEC+’s new round of production cuts is another production cut based on the 2 million barrels per day reduction in October 2022. The scale of the production cuts is enough to change the most pessimistic supply and demand balance sheet. According to estimates from monthly reports released by OPEC, IEA and EIA before March 15, the global crude oil market will accumulate storage in the second quarter of 2023, ranging from 300,000 to 700,000 barrels per day. In the second half of the year, storage will be depleted. Lord. The current OPEC+ production cut of 1.6 million barrels per day means that the world will start destocking from May 2023, and the extent of destocking will further increase in the second half of the year. This is a very good thing for the crude oil market, which is enough for SC crude oil to break through the upper edge of the oscillation platform in the past four months, which is 590 yuan/barrel, and for Brent to break through 89 US dollars/barrel.

Dong Dandan further analyzed that although the panic caused by Silicon Valley Bank previously suppressed international oil prices, the supply and demand of crude oil during this period was still relatively healthy, and crude oil demand continued to rise. For example, in the week to the end of March, traffic congestion levels in China were basically flat, down 0.2% from the previous week, but still at a high level, at 134.9% of January 2021 levels. Road traffic levels in the rest of Asia and Europe fell slightly by 2.1% and 2.8% respectively, while in North America they increased by 3.0% from the previous week. Global air traffic has climbed for the ninth consecutive week, with Western Europe, the Middle East and North Africa and Asia expected to lead the gains this week with increases of 10.0%, 7.6% and 5.3% respectively.

Sui Xiaoying, chief analyst of Founder Medium-term Futures Energy, said that OPEC+’s production cut surprised the market. The market believed it was a response to the United States’ previous announcement to postpone strategic stockpiling, and the recent banking crisis in Europe and the United States.��Intensifies the risk of economic and oil price decline. There is no doubt that OPEC+’s unexpected announcement of production cuts highlights the intensity of the geopolitical game. After the conflict between Russia and Ukraine broke out last year, the conflicts between Europe, the United States and Russia further intensified. After US President Biden came to power, relations between the Middle East and the United States also took a sharp turn. Last year, when oil prices were high, Biden visited Saudi Arabia to mediate on increasing production, but was rejected by Saudi Arabia. This also indirectly caused Russia and Middle East oil-producing countries to gradually become a community of interests. The consistency of OPEC+’s production cuts this time shows the close relationship between OPEC countries led by Saudi Arabia and non-OPEC countries led by Russia, as well as their unanimous determination to confront the United States. Due to the intensification of conflicts between the parties and the inconsistency of interests, future geopolitical games will further intensify the volatility of the oil market.

In terms of fundamentals, Sui Xiaoying said that the global economy is expected to continue to be weak in the second quarter. The economic trends of China and Europe and the United States will continue to diverge. The evolution of the banking crisis in Europe and the United States and the trend of energy prices will continue to affect the changes in the Federal Reserve’s monetary policy. From the perspective of crude oil supply and demand, OPEC+’s renewed production cuts will accelerate the contraction of the crude oil supply side, while upstream investment activities in U.S. shale oil have slowed down, shale oil output will continue to be suppressed, and the crude oil supply side will show a tight pattern. However, the performance of global oil consumption is still unsatisfactory. Under the expected economic downturn in Europe and the United States, the increase in global oil consumption this year is expected to be lower than last year’s level. The current absolute level of oil consumption in Europe and the United States is still low, but the seasonal recovery of gasoline consumption in the United States, PetroChina Consumption continues to recover slowly. If OPEC+ oil-producing countries strictly implement production cuts in the future, the crude oil supply and demand pattern will undergo substantial changes, and the global crude oil supply and demand structure will become tight.

“Judging from the trend of oil prices, crude oil has erased the decline after the outbreak of the European and American banking crises after continuous rises, and has returned to near the upper edge of the previous fluctuation range. The trend has clearly strengthened, and has once again consolidated the previous bottom range. Current crude oil supply The end-to-end drive for oil prices is upward, the demand side is relatively neutral, and the uncertainty lies in the macro side. If there are no further risks on the macro side, with the support of supply and demand, oil prices will continue to oscillate and rise.” Sui Xiaoying said.

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