After Federal Reserve Chairman Powell reiterated his “hawkish” tone, the market was worried that rising U.S. interest rates would weaken fuel demand, and international crude oil fell under pressure. Despite this, the international crude oil market still showed a relatively strong rebound trend this week. U.S. crude oil rose by about 2.95% during the week, and Brent crude oil rose by about 4.43%, erasing all losses from last week.
“The weekly increase in oil prices is mainly driven by the fact that the market-priced short-term Iran nuclear agreement has not yet been reached, and Saudi Arabia’s reiterated production cuts have aggravated supply-side concerns.” Zhong Meiyan, research director of the Energy and Chemical Department of Everbright Futures Research Institute, said that in terms of fundamentals, U.S. inventory data showed: Crude oil is destocked, but gasoline demand remains strong. In addition, the sharp rise in the price of energy products such as natural gas has led to an increase in demand for crude oil, and confidence in the crude oil market has recovered, showing a significant strengthening.
In addition, according to Dong Chao, a senior analyst at Shenyin & Wanguo Futures, there is another reason for the rapid rebound in crude oil this week: the increase in power generation demand caused by hot weather around the world. At the same time, the drop in water levels in hot weather has led to the increase in power generation capacity. The sharp decline and the fact that goods that could have been transported by ship had to be transported by truck, thus increasing the demand for gasoline and diesel.
Currently, whether the Iran nuclear agreement between the United States and Iran can be reached is affecting the market. The latest news shows that there seems to be a glimmer of hope in the tug-of-war between the United States and Iran over the Iran nuclear deal. But on the issue of who made concessions, both sides disagreed, which also triggered strong dissatisfaction with the draft agreement in Israel, which declared that it would not hesitate to use force to prevent Iran from acquiring a nuclear weapon.
According to Dong Chao, Iran said it had received the United States’ response to the EU’s “final” text, which aims to restore the nuclear agreement Tehran reached with major powers in 2015. A U.S. representative said Iran has given up on some major demands as it restarts talks on a deal to curb Tehran’s nuclear program. But according to the Dow Jones News website, the United States rejected all additional conditions proposed by the Middle East countries and urged them to lift restrictions on international inspections. “At present, the market generally believes that the Iran nuclear deal is possible, but it requires sufficient patience. Once the agreement is reached, Iran will have the capacity to expand production by more than 1.3 million barrels and can release a large amount of inventory in the short term.” Dong Chao said.
“The current market believes that the probability of reaching the Iran nuclear agreement is increasing. Iran will comprehensively consider economic development, geopolitical demands and other factors and lower its conditions to meet the relevant conditions for the United States to lift sanctions and promote the agreement.” Zhong Meiyan said, but at present, the United States The two sides have yet to make a final decision, and we believe that the market will still be given time to respond.
As for whether OPEC will immediately initiate production cuts in response to the return of Iranian oil, Dong Chao said that Saudi Arabia stated through a written interview this week that OPEC will reduce production if the Iranian issue is resolved. On the one hand, this is an effort to balance the market, and on the other hand, it is also a warning against the United States’ preference for Iran. Taking into account Iran’s ability to increase production, even if OPEC reduces production in response to the return of Iranian oil, there will be a significant gap in quantity.
It is understood that the OPEC+ production reduction meeting will be held on September 5, at which time Saudi Arabia will take the lead in reconsidering production cuts. Currently, member states such as Iraq, Kuwait, Equatorial Guinea and Venezuela have issued statements expressing support. Zhong Meiyan believes that OPEC is expected to continue cutting production to support the current overall trend of oil prices.
However, a reporter from Futures Daily noticed that compared with international crude oil, the performance of domestic SC crude oil was relatively resilient. In this regard, Zhong Meiyan said that the main reason is due to multiple factors such as increased import landed costs, higher freight rates, lower levels of futures warehouse receipts, and the expected recovery of domestic demand.
“First of all, let’s look at the inventory. The registered warehouse receipts of the previous period are currently less than 2 million barrels, which is only equivalent to the transportation volume of a VLCC tanker. The highest inventory in 2020 reached more than 40 million barrels. Secondly, the current replacement of Russian crude oil The effectiveness is decreasing. After the conflict between Russia and Ukraine, Russian crude oil can only be sold in the market at extremely low prices. Considering that the quality of Russian crude oil is similar to that of SC crude oil, this has caused great suppression on SC crude oil. However, with the recent increase in the price of Russian crude oil The rebound in prices has also led to the rise of SC crude oil. In addition, the relatively resilient performance of SC crude oil is also due to rising freight rates. Due to the shortage of fuel oil, crude oil freight rates have been rising recently, and the crude oil transportation index BDTI has increased by 115% from the beginning of the year. Considering that SC crude oil has Crude oil futures are CIF prices, and freight will be included in the price. In the end, there will be a time difference when domestic crude oil arrives at the port. It takes about 2 months from the price in the Middle East to the domestic storage. Back to the Brent oil price, it will be about June, so The current cost of domestic spot crude oil is relatively high, and position holders are not willing to sell at a loss,” Dong Chao said.