Since June, international crude oil prices have shown a trend of first restraining and then rising. The main contract price of NYMEX crude oil futures once rebounded from close to $50 per barrel to above $60 per barrel. Analysts said that under the background of storm warning, the comments of Federal Reserve Chairman Powell “pigeon” faction superimposed on the U.S. over-expected inventory reduction, the strong third quarter operation is still the main theme of crude oil price operation.
Oil prices stopped falling and rebounded
After falling sharply in late May, the main contract price of NYMEX crude oil futures hit a new low of $50.79 per barrel on June 5, and then rebounded, closing at $60.39 per barrel on July 12.
“International crude oil prices consolidated after the end of the fall in early June, during which the Iranian nuclear issue continued to escalate, and the U.S. return to the depot reduction cycle has provided a potential driver for the rise in oil prices. In addition, last week, the U.S. National Hurricane Center issued a tropical storm warning, which reportedly resulted in the closure of some offshore drilling platforms in the Gulf of Mexico, combined with the U.S. unexpected inventory reduction stimulus, oil prices soared all the way to a recent high. Gao Mingyu, chief analyst of CITIC Anxin Futures Energy, and Li Yunxu, senior analyst, said.
In addition, EIA data show that in the week of July 5, commercial crude oil stocks decreased by 94.99 million barrels to 459 million barrels, crude oil production is expected to increase by 100,000 barrels to 12.3 million barrels per day, crude oil exports increased by 58,000 barrels per day, while imports excluding strategic reserves decreased by 283,000 barrels per day. U.S. crude oil inventories accelerated their decline after returning to seasonal trend in June. Analysts said the steady decline in inventories showed the impact of the sharp drop in oil prices at the end of last year on upstream investment, i.e. the number of active drilling rigs declined gradually, production entered a relatively stable period, and output growth declined year-on-year.
Short-term oil prices will run more frequently
From the macro and geographic perspective, Gao Mingyu and Li Yunxu said that the weakening of crude oil demand growth has long been a consensus and fully traded. The possible improvement of the recent international trade situation and the rise of global easing expectations provided a relatively mild environment for oil prices, and the possibility of a sharp fall in the fourth quarter of last year was greatly reduced. The Iranian nuclear issue and US-Iran relations are still escalating. Although the impact on Iranian crude oil exports has been difficult to have a marginal effect, there is still room for fermentation of premium caused by geo-risk.
For the game pattern among oil-producing countries, after 2016, it has completely changed from “prisoner’s dilemma” to “coward’s game”. Saudi Arabia’s best choice is to limit production and ensure price. The game balance determines that the relative stability of OPEC production will be a new normal for a period of time. The possibility of increasing production is low and the supply side is low. The risk of a “black swan” is not high.
For future markets, Li Yanjie, a futures analyst at CITIC Construction Investment Futures, said that overall, OPEC production declines, hurricanes and geo-risk rises resonate, supporting oil prices in the short term or continue.
Gao Mingyu and Li Yunxu believe that although the third quarter crude oil price rise is worth looking forward to, from both the macro and the U.S. market, the driving force of the rise is more from the repair of the earlier pessimistic expectations, the market may not be smooth. Strategically, it is suggested to do more on the low side and grasp the band market.