International oil prices, which have been rising all the way recently, slowed down in the first week of May as U.S. crude oil inventories and production both hit new highs.

At the close of the day, the price of light crude oil futures for June delivery on the New York Mercantile Exchange rose by $0.13 to $61.94 a barrel, or 0.21 per cent. London Brent crude oil futures for July delivery rose $0.10, or 0.14%, to close at $70.85 a barrel.

U.S. crude oil production recently hit a record high of 12.3 million barrels a day. In recent months, U.S. crude oil production has remained stable, but still 2 million barrels a day more than last year.

Inventories, according to the U.S. Energy Agency report, as of April 26, U.S. crude oil inventories increased by 9.934 million barrels, pushing U.S. commercial crude oil inventories to their highest level since September 2017. Statistics also show that U.S. crude oil stocks have increased in five of the past six weeks.

Eric Norland, senior economist at the Chicago Mercantile Exchange Group, is reported to have said that the shale oil revolution in the United States has led to a 1.3-fold increase in the country’s crude oil production over the past 10 years, exerting tremendous and sustained downward pressure on oil prices and showing itself in trading positions.

In addition, data released by Russia showed that crude oil production in April was 11.233 million barrels a day, an increase of 2.4% over the previous year and a 0.6% decrease over the previous year.

The news of abundant crude oil supply led to a sharp dive in international oil prices on the 2nd, but the US economic data improved, boosting confidence in the crude oil market and pushing international oil prices back up every other day. The U.S. unemployment rate fell to 3.6% in April, the lowest level in more than 49 years, and 263,000 new jobs were created in the non-agricultural sector that month, up from 190,000 expected by the market, according to data released by the U.S. Department of Labor on Wednesday.

Basically, other positive factors also support oil prices. According to data released by American oil service company Baker Hughes on May 3, the number of active drilling wells in the United States decreased by 11 in April, 37 in March, 9 in February and 23 in January, compared with 2 in December last year. Baker Hughes also said in his report that the number of active natural gas drillings in the United States fell by three to 183 this week.

At the same time, some sources said that Russian oil producers had received notification from Transneft, a pipeline monopoly, to cut production by 900,000 tons by May 7, because Russian crude oil was seriously disrupted by organic chloride pollution.

After oil, the United States is considering imposing sanctions on other dollar sources in Iran and will focus on more companies and financial institutions engaged in commercial activities with Iran to cut off Iran’s access to the dollar, the Wall Street Journal reported.

The move will crack down on export sales of Iranian petrochemical products and other commodities. Iran’s oil minister, Bijan Namdar Zanganeh, said today that Tehran would not remain silent if other OPEC members threatened Iran’s interests.

The dissolution of OPEC is possible. In April, the White House issued a public statement demanding that all Iranian oil buyers must stop importing by May 1 or face sanctions.

The White House aims to cut off the lifeline of Iran’s annual oil revenue of $50 billion to pressure Tehran to limit its nuclear and ballistic missile tests and stop its support for the Assad government in Syria and the Houthi forces in Yemen. And that has sparked resentment in Iran. Iran’s oil minister, Bijan Namdar Zanganeh, told members of Congress that the Trump Administration’s sanctions waiver plan would never be met: “It is impossible for the United States to expect to cut off Iran’s oil exports. We will do our best to break the United States sanctions.

He pointed out that the current international crude oil market is still relatively fragile, the market can not predict, can not be sure that other oil-producing countries will produce enough crude oil to meet demand, some states boast that idle reserves are higher than the actual level. Iran’s semi-official media Tasnim (Tasnim) news agency reported that Iran’s Islamic Revolutionary Guards Naval commander Alireza Tangsiri said that if Iran can not use Hormuz, Str. Of, then it will be shut down.

The US attempt to keep Iran’s oil exports down to 0 will fail. The International Monetary Fund has previously warned that Iran’s recession is expected to deepen as a result of US economic sanctions, which is expected to shrink by 6% per cent this year, shrinking for the second year in a row, with inflation likely to soar to more than 40%, the highest level since 1980, the third largest in the world,

Only better than Venezuela and Zimbabwe. In addition, the EIA Weekly, released in Wednesday, showed a high innovation in U.S. crude oil production in the week of April 26, adding 100,000 barrels to 12.3 million barrels per day. The week’s EIA crude oil stock increased by 9.934 million barrels, the highest increase in the week of November 16 last year (24 weeks), pushing the United States last week crude oil stocks rose to the highest since September 2017.

It was May and during the May Day holiday, the fertilizer market was not relaxed at all, but it was at the end of spring and the fertilizer market was relatively light. Let’s talk about the adjustment of ammonium chloride Market for small nitrogen fertilizer in May. At present, the domestic ammonium chloride multi-market factories have sufficient orders to be issued and some of them are in short supply. Therefore, if you want to get the goods, you still need to “wait” and the overall market price is running at a high level. For example, according to the statistics of China Chemical Fertilizer Network, the mainstream domestic dry ammonium factory quotation is about 650-800 yuan/ton, and some of the transactions can be negotiated, of course, the price outside the province is lower than this. However, there are exceptions to the above situation. The representative is the northeast, where demand is over, ammonium chloride is abundant, cargo is under pressure, and prices are falling. The price of mackerel circle before the festival has dropped to 780 yuan/ton, and the turnover is still slow, which is obviously different from the southern market.

In May, the local ammonium chloride market is slightly delicate. Although the spot market is still relatively tight, the price is now loose. Next, the price trend of ammonium chloride has become the focus of attention in the industry. The following points will be explained.

Firstly, it is difficult to reduce the high-level operation of joint alkali enterprises in the short term. The new capacity load of a large ammonium chloride plant in Henan has increased smoothly. Most of the large ammonium chloride plants in Jiangsu and Southwest China have been overloaded for a long time. Only half of the units in a large ammonium chloride plant in Hubei have been overhauled but will be restored soon. According to the statistics of China Chemical Fertilizer Network, the overall industry start-up rate of the joint alkali enterprises has risen to 82%. However, there are fewer ammonium chloride enterprises planned to be overhauled, only one plant in Jiangsu It is scheduled to be repaired for three days from May 10. In addition, two factories in Jiangsu and Chongqing are scheduled to stop inspection for about half a month at the end of the next ten days. However, even if parking is still available for export, it is obvious that ammonium chloride enterprises will maintain a high level at least in the first ten days of operation. And the soda market is considerable, some enterprises will still focus on production of soda, at the same time, the production of ammonium chloride will rise.

Secondly, the price of urea fluctuates slightly. From the point of view of supply and demand, the bearish trend of urea accounts for the majority. The transportation of liquid ammonia, which is closely related to urea production, is limited during May 1st. Under the double pressure of environmental protection and safety inspection, while liquid ammonia keeps low inventory, some enterprises will focus on urea production and increase urea shipments more or less. In the off-season of agricultural demand, most wholesale commodities in the market are priced or even partly stopped wholesale. Hefei enterprises have high sales pressure, low production enthusiasm, plywood plant and other needs are still supported, but after all, limited, so in the situation of high urea start-up and weak demand, the market is unlikely to improve, which will affect the purchasing volume of ammonium chloride for enterprises such as compound fertilizer.

Thirdly, the new demand for ammonium chloride has slowed down and the turnover has cooled down. First, during the gap period of spring and summer, ammonium chloride enterprises have sufficient orders to be issued, while more than 200,000 tons are less than 10,000 tons. That is to say, the raw material reserves of compound fertilizer plants and extruded granular ammonium chloride plants are sufficient, and the demand for filling orders will be very limited in the later period. Second, when the market demand in Northeast China is over, some ammonium chloride supplies in the southern market have to change their sales direction, while prices in Northeast China are declining. To a certain extent, it affects the trend of other regions; thirdly, the export volume is far from easing the pressure of domestic ammonium chloride shipment. According to customs data, the total export volume of ammonium chloride for fertilizer and non-fertilizer in March was 71.3 million tons, and the total export volume of ammonium chloride for non-fertilizer was 74.6 million tons, which increased compared with February. However, in the same period of previous years, the export volume in April should not change greatly or decrease. The domestic market is likely to increase in the amount of digestion awaited.

Finally, in a comprehensive view, the short-term sufficient standby still makes the spot market tight, and the firm’s confidence in the bid price is relatively sufficient. Therefore, it is expected that the ammonium chloride market will continue to run at a high level in May. If there are small orders in some parts, the price will probably increase slightly for the settlement of the factory. However, from the perspective of the high start-up and the light of new orders and the limited replenishment orders, it is expected that May will be the month. While the price of ammonium chloride is firm, local transactions should be loosened.

According to the data released recently by the National Bureau of Statistics, China’s energy consumption per unit of GDP fell by 2.7% in the first quarter compared with the same period last year, of which the energy consumption per unit of added value of industrial units above the scale dropped by 3.4%.

Liu Wenhua, Director of the Energy Statistics Department of the National Bureau of Statistics, said that in the first quarter of this year, China’s energy supply and demand continued to grow steadily as a whole and its structure was constantly optimized.

According to the preliminary calculation of the National Bureau of Statistics, the total energy consumption in the first quarter increased by 3.5% year on year. Among them, the proportion of clean energy consumption, such as natural gas, hydropower, nuclear power and wind power, in total energy consumption increased by 1.5 percentage points over the same period last year, while the proportion of coal consumption decreased by 1.8 percentage points.

The escalation of U.S. sanctions will undoubtedly further deteriorate Iran’s economy and external environment, but it will not force Iran to yield and increase the risk of escalation of confrontation between the two sides.

On April 22, the U.S. government announced that it would no longer grant sanctions exemption for Iranian oil imports to any country or region, which aroused great concern of the international community and the rise in international oil prices.

In fact, this is also a big move by the United States to expand the pressure on Iran’s economy and force Iran to return to the negotiating table

In response, on April 23, Geng Shuang, spokesman for the Chinese Foreign Ministry, said that China firmly opposes the implementation of unilateral sanctions and so-called “long arm jurisdiction” by the United States. China urges the United States to earnestly respect China’s interests and concerns, refrain from wrongdoing that harms China’s interests, and will continue to work to safeguard the legitimate and legitimate rights and interests of its enterprises.

U.S. -Iran Confrontation Upgrade

In May 2018, after the announcement of withdrawal from the Iranian nuclear agreement and the resumption of sanctions against Iran, the United States strongly demanded that all countries stop importing Iranian crude oil. However, when the sanctions came into effect in early November, eight countries and regions were granted 180 days of exemption. Now, the United States decides to completely end the exemption of sanctions against Iran, which will have a new impact on Iran itself, the international oil market and Iran’s crude oil importers.

First, the US containment policy towards Iran has entered a new stage of “blockade”. This time, the formal abolition of exemption by the United States is the continuation and escalation of its comprehensive policy of containing Iran, cutting off Iran’s largest source of income by “liquidating” its oil exports, and forcing Iran to make a choice between changing its policy behavior and economic collapse.

Not long ago, the United States listed Iran’s Islamic Revolutionary Guard as a “terrorist organization”, which shows that the Trump Administration has upgraded its “blockade” of Iran and vowed to carry out its containment policy to the end.

The escalation of U.S. sanctions will undoubtedly further deteriorate Iran’s economy and external environment, but it will not force Iran to yield and increase the risk of escalation of confrontation between the two sides.

Iran’s policy options are limited. At present, the average daily export volume of Iranian crude oil has dropped to about 1 million barrels, which is bound to decline further in the future. Iran strongly condemns the “illegal sanctions” imposed by the United States. On the one hand, it said that it would consult with its partners before deciding how to deal with them. On the other hand, it pledged not to compromise, possibly speeding up the resumption of its nuclear development plan. Iran’s Islamic Revolutionary Guard has once again threatened to close the strategic Strait of Hormuz. Iran’s parliament passed an overwhelming majority on April 23 to list all U.S. troops as “terrorist organizations”.

The escalation of the confrontation between the United States and Iraq may usher in a new round of geopolitical tensions.

Crude Oil Market Meets Major Challenges

Secondly, the U.S. move poses a major challenge to the international crude oil market. As soon as the United States announced the termination of Iran’s oil sanctions exemption, international oil prices rose sharply to a six-month high. Brent crude oil futures rose 3.27% to $74.14 a barrel; West Texas Intermediate Oil (WTI) futures rose 2.67% to $65.71 a barrel; and Shanghai crude oil futures rose 2.85%.

On the one hand, there are new variables in the international crude oil supply. Although the United States has indicated that it will make up for the supply gap with Saudi Arabia, the United Arab Emirates and other oil-producing countries to ensure the supply of global crude oil market, considering the uncertainty of domestic situation and oil production in Venezuela, Libya, Nigeria and other oil-producing countries, the risk of Iran’s crude oil export disruption will bring new pressure to the global oil supply. Stimulated already tense market nerve.

On the other hand, OPEC’s production reduction agreement is facing new uncertainties. In order to avoid the shortage of oil supply and the rapid rise of oil prices, Saudi Arabia, the United Arab Emirates and other countries may no longer insist on extending the reduction agreement, but withdraw from the reduction action under the cooperation requirements of the United States.

Multinational opposition to the abolition of immunity by the United States

Finally, Iran’s crude oil importers are facing new policy options, and relations with the United States may become tense.

In the list of exemptions announced by the United States, Greece, Italy and Taiwan China have reduced their crude oil imports from Iran to zero, while mainland China, South Korea, India, Japan and Turkey have maintained considerable Iranian crude oil imports.

At present, only about 10 days before the end of the exemption period, it is unlikely that these countries will be required to “clean up” completely, even if it is difficult to ship oil originally scheduled for May out of Iran.

But if these countries continue to import, they will face retaliation from the United States, and higher oil prices may also put some countries under greater currency depreciation and inflationary pressure. Japan and South Korea, which have been expecting a delay, have expressed concern about the lifting of the exemption from the United States; Turkey has made clear its opposition to unilateral sanctions and will continue to buy Iranian crude oil; India, which relies on Iranian oil, is also eager to find a solution.

Therefore, the policy and response of Iran’s oil importing countries largely determine the effect of sanctions imposed by the United States and Iran’s living environment, while those countries that are difficult to get rid of Iran’s oil importing countries are facing a new round of tension with the United States.

In the short run, it is difficult for the United States to quickly “zero” Iran’s crude oil exports, and Iran will not wait to die, taking counter-measures while seeking new ways to circumvent sanctions. At the same time, uncertainties from the international crude oil market and oil importing countries still exist, and the future development prospects of the event are affected by multi-game.

Qatar’s foreign minister, Mohammad bin Abdullahman al-Thani, spoke out on May 1, criticizing the U.S. attempt to “clean up” Iranian crude oil exports, in public opposition to this ally.

Qatar’s Foreign Minister, as the host of the Asian Cooperation Dialogue held in Doha, said that the unilateral sanctions imposed by the United States on Iran were “unwise” because they would adversely affect importers benefiting from Iranian crude oil.

He said: “The crisis must be resolved through dialogue and only through dialogue. We believe that unilateral sanctions will not have a positive effect.”

The United States withdrew from the comprehensive agreement on Iran’s nuclear issue last May and resumed sanctions against Iran in two batches in August and November of the same year in an attempt to block Iranian crude oil exports, but in November it granted eight Iranian crude oil importers a six-month exemption from sanctions. The exemption expired on May 1 this year, and the United States decided not to renew it.

The risk of “zero” Iranian crude oil exports has triggered concerns in the international crude oil market, boosting oil prices. The United States says it is coordinating with Saudi Arabia and the United Arab Emirates, the major oil producers, to ensure adequate supply of crude oil.

As a Gulf country, Qatar produces only a small amount of crude oil, about 600,000 barrels a day, but its natural gas production is high, making it the world’s largest exporter of liquefied natural gas; its natural gas reserves account for 13% of the world’s total reserves, second only to Russia and Iran.

Qatar officially withdrew from OPEC, the Saudi-led Organization of Petroleum Exporting Countries, on January 1 this year. Qatar claims that the reason for “withdrawal” is “irrelevant to politics”, but “it wants to concentrate on natural gas exploitation”.

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed diplomatic relations with Qatar in June 2017 and imposed sanctions and blockades on it. The four countries designated Qatar as “supporting terrorism”, “undermining regional security” and turning to Iran. Qatar denies these allegations. The crisis of severance of diplomatic relations has continued to this day, and the good offices of the United States and Kuwait have failed many times.

Officials from Saudi Arabia and Bahrain attended the Asian Cooperation Dialogue on the 1st. According to Reuters, this is the first time that the two countries have sent officials to a meeting in Qatar since the break-up of diplomatic relations.

Qatar’s foreign minister told Reuters that Saudi and Bahraini officials’participation in the meeting was “limited” and that Qatar’s relations with the two countries showed no signs of thawing.

Qatar is one of the most important allies of the United States in the Gulf. The Udaid Air Force Base in the southwestern part of Qatar is the largest air base in the Middle East. Qatar is closer to Iran, having previously announced the full resumption of diplomatic relations between the two countries. Qatar has repeatedly expressed its willingness to help the United States mediate with Iran.

Singapore reported on April 26 that in March this year, China imported 6.94 million tons of natural gas, an increase of 16.7% over the same period last year, because LNG imports play an increasingly important role in China’s energy structure.

According to the latest data released by the General Administration of Customs on Friday, 4.06 million tons of liquefied natural gas and 2.88 million tons of pipeline natural gas were imported that month, up 25.2% and 6.5% respectively from the same period last year. From January to March, China imported 24.27 million tons of natural gas, an increase of 17.8% over the same period last year. Customs data show that the import of liquefied natural gas increased by 21% to 14.95 million tons in the same period, while the import of pipeline natural gas increased by 13.2% to 9.32 million tons in the same period.

In March this year, Australia surpassed Turkmenistan to become China’s largest natural gas supplier, transporting about 2042,000 tons of liquefied natural gas to China by boat, an increase of 13% annually.

Turkmenistan was the second largest supplier of natural gas this month, exporting about 20.37 million tons of natural gas to China through pipelines, down 10% from a year earlier.

Customs data show that imports of liquefied natural gas from Qatar fell 39% annually to 4323.23 million tons, the second consecutive month of this year, much lower than the 1.12 million tons in January.

Customs data show that imports in March fell by 8.3% compared with 7.56 million tons in February, imports of liquefied natural gas by 6.8% and pipeline natural gas by 10.3%, the second consecutive decline since this year. Market sources said that the year-on-year decline in imports in March was mainly due to the end of winter heating in mid-March, the reduction of natural gas consumption in the warm season and the weakening of household demand.

Recently, oil prices have soared and plummeted in the international crude oil market.

As the United States announced that it would ban Iranian oil exports in early May, the previous sanctions exemption granted by the U.S. government to some countries and regions for importing Iranian oil will not continue after the expiration of this year in early May. International oil prices rose sharply, but then fell sharply as President Trump called OPEC to take action to reduce oil prices. Analysts predict that international oil prices will continue to oscillate sharply in the near future due to geopolitical uncertainty.

As of April 26, light crude oil futures for June delivery on the New York Mercantile Exchange had fallen $1.91, or 2.93%, to $63.30 a barrel. London Brent crude oil futures for June delivery fell $2.20, or 2.96%, to $72.15 a barrel.

In the international gold market, spot gold has rebounded sharply, driven by short covering and bottom-buying. The annual first quarter real GDP of the United States, announced on the 26th, was 3.2% year-on-year, a new high since the third quarter of 2018, higher than the previous expected value of 2.3%, but the U.S. media believe that the real economic performance is not ideal.

On April 26, the most active June gold futures market on the New York Mercantile Exchange rose $9.1 to $1288.8 an ounce, or 0.71 per cent, from the previous day. Analysts said that the main reason for the rise in gold futures prices was the weakening of the dollar on that day.

On that day, silver futures for May delivery rose 12.6 cents to $15.005 an ounce, or 0.85%, while gold futures for July delivery rose $13.9 to $903.6 an ounce, or 1.56%.

Core view

At present, there are short-term upstream re-production and production reduction, medium-term external disk increment and olefin production, long-term production safety and environmental protection management and other factors, short-term operation is biased, but attention should be paid to whether Jiutai MTO plant can start smoothly, and whether the price can break through the safe marginal production cost of methanol.

Bulk internal reference: Methanol is obviously weak in recent years. Today’s daily line receives a big negative line, leading the decline in commodities. In fact, the whole chemical sector is relatively weak in recent years. What do you think is the cause? Do you think methanol will continue to fall in the future?

Zhao Ting: In the early period, OPEC eased the global oil supply and demand situation. The sanctions imposed by the United States on Iran directly aroused the bullish mood of the market, and had a good basis for reducing production. As a trigger, the sanctions imposed by the United States on Iran directly promoted oil prices to break through the previous period of shock and create a new high. Oil prices have recovered in the last two days, mainly due to the increase in U.S. crude oil inventories. In the case of strong crude oil, downstream chemical products have declined in varying degrees, mainly because the rising price of crude oil affects the profits of the chemical industry through three mechanisms: cost, inventory and consumption. At present, the methanol inventory has increased. Under the background of increasing inventory and weak downstream demand, it is difficult to pull up the price of crude oil even if it goes up.

As of April 25, methanol stocks in Jiangsu were 617,300 tons (without Lianyungang area), up 34,800 tons from April 18, up 5.97%. A small number of downstream factories in Zhejiang, Jiangsu and other places continue to replenish goods from Taicang area. At present, the total circulation supply of Jiangsu is 146,000 tons. Methanol inventory in Zhejiang (Jiaxing and Ningbo) was 207,500 tons, up 0.84 million tons from April 18, an increase of 4.22%. Recent arrivals were mainly imported goods. As a whole, Zhejiang’s negotiable goods supply is 0.7 million tons. At present, methanol inventory in South China (excluding Fujian) is 98.3 million tons, 30,000 tons less than that on April 18, a decline of 23.38%. Fujian has an overall circulation supply of 26,000 tons. Pay attention to the large number of internal references, do not miss every wonderful research report! 

Overall, methanol stocks in coastal areas (Jiangsu, Zhejiang and South China) rose to 953,100 tons, and the total methanol circulatable supply in coastal areas is estimated to be around 259,000 tons. According to incomplete statistics, from April 26 to May 12, the arrival volume of Chinese imports was 307,500 tons. From mid-late May, Iranian and non-Iranian cargo arrived in eastern and southern China to unload, especially Iranian cargo. In addition, transshipment cargo was reported to exist in a few areas.

Port inventory is high, it is difficult to continue to depot, upstream start-up rate rises annually, but still maintain a relatively low level, upstream inventory is high. On the mainland side, the peak of spring inspection has passed. Intermittent demand can not consume the supply pressure of the mainland. Inventory in the downstream is high. The commissioning of several new MTO units downstream may delay start-up, chemical industry overhaul and renovation, delay the speed of depot elimination and sluggish demand. At present, both the port and the mainland need to add new MTO demand-driven, to see if Jiutai MTO device can successfully start. Short-term skewed view.

Bulk internal reference: Do you have any suggestions on operation?

Zhao Ting: At present, there are short-term upstream reproduction and reduction of production, medium-term increment of external disks and production of olefins, long-term production safety and environmental protection management and other factors, short-term operation is biased, but we should pay attention to whether Jiutai MTO plant can start smoothly, at the same time, we need to pay attention to whether the price can break through the safe marginal production cost of methanol.

Oil prices in domestic and international markets plunged sharply from 2 a.m. on April 27, and then continued to weaken throughout the day. Oil prices continued to fall sharply during the European trading period starting at 4 p.m. WTI and Brent markets fell more than $4 from intraday highs. The decline of 6% in one day was a crash. Oil prices totally reversed their rise in the last week. Technologically, it constitutes a typical phased form of roofing. Domestic INE crude oil futures have withdrawn most of their gains this week, although they have significantly increased compared with the external market, showing a relatively resilient performance.

When oil prices fell sharply for the first time, market investors sought a reasonable explanation. Then Trump told reporters on Friday that he had called OPEC to ask it to lower the price of crude oil, but did not say who he was talking to. After this information, oil prices continued to fall rapidly. The market generally believed that this remark was the trigger of the sharp fall in oil prices on Friday night. But in the early morning, the media said that the Secretary-General of OPEC, the Crown Prince of Saudi Arabia and the Minister had not talked with him before oil prices were able to recover from the sharp fall and shrink slightly. However, oil prices still hit the biggest one-day decline in a year all over the world.

The sharp drop in oil prices and the soaring news show that investors are hesitant about future market expectations and unstable mindset under the combination of increased Iranian sanctions and OPEC production expectations. In fact, from April 22, when the United States announced that it would terminate Iran’s sanctions exemption on May 2, oil prices took another step. After the U.S. oil broke through $66/barrel and the oil distribution reached $75/barrel, the majority of investors’long expectations in the market had been fully released. The market showed that once there was a loosening of investors’ initiative to flee long positions, they were very active and profitable. The shift of multi-air power has become a natural thrust for the fall in oil prices.

Oil price has formed a stage-high pattern

If not for the 26 th drop, crude oil prices were in a booming situation throughout April, and the three benchmark oil prices showed a trend of substantial growth, of which SC price benefited from OPEC + production reduction, the biggest increase this month.

From the seasonal point of view, the seasonal inflection point usually occurs in May-June. Prices usually keep rising until then. This year’s crude oil price trend is basically similar to seasonal trend, but in absolute range significantly exceeded seasonal trend. In addition to the seasonal support of the fundamentals, this year’s fundamentals speculation has also fully overlapped the impact of OPEC + production cuts and the withdrawal of Iranian and Venezuelan production capacity. These combined factors have amplified the seasonal trend of crude oil, but at present it seems that the probability of oil prices peaking at inflection point has greatly increased.

Logically, the supply-side story has completely dominated the price trend, and the demand level has been completely forgotten by the market. Therefore, whether we analyze the historical market or judge the future market, we still need to grasp the core of the market – supply.

Analyzing the historical situation, the supply-side stories mainly focus on two aspects: one is the high implementation rate of OPEC + production reduction; the other is the decline of production in Iran and Venezuela under U.S. sanctions. To judge the future market, the supply side should pay attention to three aspects: first, whether the United States blockades Iran or its export exemption and whether Iran will react excessively; second, whether OPEC + will increase production to compensate for the withdrawal of Iran’s production capacity in accordance with the U.S. plan; and third, the U.S. crude oil production.

On the implementation rate of OPEC + production reduction, the latest OPEC monthly report shows that Saudi crude oil production in March was 9.794 million barrels per day, up from 10.087 million barrels per day. Saudi crude oil production fell by 324,000 barrels a day in March. Saudi Arabia’s confidence in such a firm cut was unexpected. 9.8 million barrels per day of crude oil production was also on schedule. Brent also lived up to Saudi expectations and once again broke through the pressure level above. All along, Saudi Arabia and its firm attitude show that Saudi Arabia is making every effort to rebalance the oil market. Although Saudi Arabia knows that shale oil is stealing its share, and that Saudi Arabia’s efforts are ultimately to make a wedding dress for shale oil, Saudi Arabia can’t do both as part of the interests of the United States and as part of its own demand for high oil prices at home. Yes. So the result is that the tightening of the physical market will continue.

On the Iranian issue, with the news that Iran’s exports are about to be completely blocked by the United States, crude oil prices have soared, and Brent and WTI have made significant breakthroughs. Now the Trump government has offered a plan to negotiate with Saudi Arabia and the United Arab Emirates to increase production to fill market gaps. In our previous report analysis, we pointed out that Trump and Saudi Arabia have different target prices, and the current oil price is close to Saudi Arabia’s target price, so Saudi Arabia will probably make up for Iran’s vacancy according to the U.S. plan. In this case, if Saudi Arabia increases production, the contradictions between other oil-producing countries will arise, following Saudi Arabia’s example to increase production or probability events. Russia is one of the most unswerving links. The implementation rate of OPEC + Production Reduction Alliance will decline dramatically in the foreseeable future. So the current market focus is on the next step of OPEC + action. If Saudi Arabia remains firmly determined to cut production, then the feast of bulls will continue. If the U.S. plan is accepted by OPEC + then the direction may change.

The supply side also needs to pay close attention to U.S. crude oil production. American crude oil production has been hovering around 12 million barrels for a long time because of the low price of crude oil in the previous period. However, with the recent price rising to a high level, American crude oil production should show signs of recovery. Although the global supply is shrinking under the influence of American political means, American crude oil just took advantage of this opportunity to quickly occupy the market. 。 If U.S. crude oil production increases substantially again, then U.S. crude oil overcapacity will spill over sufficiently.

In addition, on the demand side, behind the sharp rise in oil prices, we also see the shortcomings of the range of product oil follow-up. Whether in Singapore, the United States, Europe or China, the price gap of product oil cracking has declined to varying degrees. The price gap of American diesel oil cracking has declined to a relatively low level, and the situation in China is worse than that in any other region, whether gasoline or diesel oil. Prices are showing signs of fatigue, although crude oil prices remain strong, but China’s refined oil prices did not follow. In this case, we have been doubting how long the demand will last under high oil prices. Although gasoline cracking in other areas is still relatively good, the main reason is that the fund spends a lot of real gold and silver on the price of gasoline!

According to the position data, the report released by the Commodity Futures Trading Commission (CFTC) on Friday (April 26) shows that the bullish crude oil will continue to heat up in the week ending April 17 to April 23, with a net long speculative crude oil increase of 32101 contracts to 547 359 contracts.

But on Friday, from the three major crude oil futures market movements, the bulls’departure continued to be obvious, especially the domestic INE crude oil futures which can see the changes of the market positions immediately. Within 24 hours, the capital positions were reduced by more than 10,000 hands, with the reduction rate approaching 15%, indicating the strong willingness of the bulls to leave the market. Although the international crude oil futures can not see the changes of the market positions in time, it is obvious from the perspective of the international crude oil futures market. Looking at the face-to-face action, the bull resistance is obviously insufficient, which indicates that market confidence and expectations have begun to change significantly.

To sum up, crude oil prices are now moving towards a cooling-off period after the crazy transition. Whether it is Brent’s monthly difference or the net long position of gasoline futures, after the crude oil market has achieved its best performance in more than 10 years under the impetus of multiple interest and multi-resonance, the oil price has ushered in an important turning point. In the next 5-6 months, the market will pay attention to the change of OPEC+in the action of reducing production. In June, the market will focus on the change of OPEC+in the action of reducing production The probability of the OPEC meeting will reach an agreement to reduce the implementation rate of production cuts, when market capacity will be released to a certain extent, and is usually expected to be released in advance of the price.

In short, at the current price level, the momentum for the market to continue to rise has been exhausted, and the periodic high of oil prices has probably occurred. Whether it is a decline of $5-10 on one side or an interval crossing above an integer level, adjustments should not be absent. Therefore, in strategy, we can pay attention to Brent short-selling opportunities in the near and far monthly difference, and customers who hold multiple positions should pay attention to controlling market risk.