Crude oil weekly review: NYMEX oil price hits a new high in more than two and a half years, and both ends of supply and demand build three positives
International oil prices continue to rise for three consecutive weeks, and NYMEX crude oil hits a record high in more than two and a half years, as the market predicts that with the increase in the new crown vaccination rate, the outlook for global demand will further improve, and oil-producing countries including the Organization of Petroleum Exporting Countries (OPEC) Supply restrictions and slow progress in the US-Iran negotiations on the resumption of the nuclear agreement have further pushed up oil prices.
NYMEX crude oil futures rose 2.03% this week to US$70.78/barrel, an intraday high of US$71.24/barrel since October 17, 2018; ICE Brent crude oil futures rose 1.11% this week to US$72.62/barrel, an intraday record Since May 20, 2019, it has reached a new high of $73.09 per barrel.
U.S. donates 500 million doses of vaccine
U.S. President Biden said on Thursday that the donation of 500 million doses of Pfizer’s new crown vaccine to the world’s poorest countries will strongly boost the fight against the virus. The United States will spend US$3.5 billion in the largest vaccine donation campaign in a single country, but it will also stimulate other G7 leaders to follow up with donations—including British Prime Minister Johnson.
The leaders of the Group of Seven countries hope to vaccinate the world by the end of 2022 in an attempt to stop the new crown epidemic that has killed more than 3.9 million people, undermined the global economy and disrupted the normal lives of billions of people.
ANZ Research said in a research report: “Recent traffic data shows that as the epidemic eases, tourists are traveling… The boost to demand is expected to be strong.” They are referring to Tom Tom data showing that 15 European cities The level of traffic congestion has reached its highest level since the outbreak.
Analysts from ANZ Research also said that data show that road traffic in most parts of North America and Europe has returned to the level before the new crown epidemic, which is encouraging. “Even the aviation fuel market has shown signs of improvement. The European flight density has been in the past two years. Weekly increased by 17%.”
Vaccination has boosted global economic activity, demand has rebounded faster than supply, and the oil market needs more supply to meet demand. The US investment bank Goldman Sachs said,The price of Brent crude oil is expected to rise to US$80 per barrel this summer.
A report released by Goldman Sachs late Thursday said: “The increase in vaccination rates has led to an increase in travel out of the United States and Europe. Last month, global demand was estimated to increase by 1.5 million barrels/day to 96.5 million barrels/day.” Goldman Sachs also predicts that oil demand will continue to recover, and global oil demand will reach 99 million barrels per day in August.
OPEC maintains forecast for surge in oil demand in the second half of the year
The Organization of the Petroleum Exporting Countries (OPEC) maintains its forecast that global oil demand will recover strongly in 2021, driven by the United States and China. Despite the uncertainty brought about by the pandemic, it pointed out that the organization of oil-producing countries needs to produce more oil.
In a monthly report on Thursday, OPEC stated that oil demand this year will increase by 6.6%, or 5.95 million barrels per day. The forecast remains unchanged for the second consecutive month. “In general, the rebound in global economic growth and the resulting recovery in oil demand are expected to gain momentum in the second half of the year.”
OPEC stated in its monthly report: “The global economic recovery has been postponed due to another surge in new crown cases and the re-imposition of lockdowns in major economies such as the Eurozone, Japan and India.” OPEC expects the global economic growth rate in 2021 to be 5.5%, and Last month’s estimates were flat, and it is assumed that the impact of the epidemic will be “basically contained” in the beginning of the second half.
OPEC also said. Although the United States is expected to contribute the most to the growth of demand in 2021, OPEC said that the demand in the industrialized countries of the Organisation for Economic Cooperation and Development (OECD) will not fully recover after the sharp drop in 2020.
Market rebalancing
In April this year, OPEC+ agreed to gradually loosen oil production restrictions from May to July, and confirmed this decision at the June 1 meeting. After July, most production restrictions will continue. OPEC stated that OPEC+’s efforts “played a major role in leading the market towards rebalancing”.
In the report, OPEC maintained its oil production estimate for this year at 27.7 million barrels per day, even though non-OPEC oil production had been revised upwards slightly. In theory, this allows OPEC+ to further reduce production restrictions in the second half of the year.
IEA: OPEC+ will need to increase oil production
The International Energy Agency (IEA) announced a monthly report on Friday (June 11) that OPEC+, the alliance of oil-producing countries, will have to increase production to meet oil demand by the end of 2022, which is expected to rise to pre-COVID-19 levels.
The IEA pointed out: “OPEC+ must open the oil gate so that the global oil market can maintain sufficient supply.” The IEA also said that the rising demand and the short-term policies of various countries, and the IEA last month’s climate report called for a cessation of new supply for oil, gas and coal projects. The financing position conflicted.
The IEA stated: “In 2022, the OPEC+ group’s crude oil supply led by Saudi Arabia and Russia may be 1.4 million barrels per day higher than the target of July 2021 to March 2022.” It also stated that the emission reduction commitments proposed by countries have not yet been made. With the support of short-term policies and measures, “oil demand looks expected to continue to rise…”
The US Energy Information Administration (EIA) said on Tuesday that US crude oil production in 2021 is expected to decrease by 230,000 barrels per day to 11.08 million barrels per day, which is less than the 290,000 barrels per day estimated last month. EIA said: “According to current forecasts, U.S. crude oil prices will remain above US$60 per barrel in 2021.”
Traders and shipbrokers said,U.S. crude oil exports are expected to decline in June. According to data from the tanker tracking company Kpler, exports in May have been hit, with US crude oil shipments of 2.6 million barrels per day, a decrease of about 500,000 barrels per day from April.
Rosneft CEO Sechin also said on Saturday (June 5) that the world will face a severe oil shortage for a long time due to insufficient investment in the process of promoting alternative energy sources, while the demand for oil continues to rise.
He said: “Due to insufficient investment, the long-term stability of oil supply is at risk.” He added that one of the reasons for the insufficient investment is that large energy companies try to increase shareholder income through stock buybacks and increased dividends.
U.S.-Iran talks are progressing slowly
But U.S. Secretary of State Blinken said earlier this week that even if the U.S. and Iran reach a nuclear agreement, hundreds of U.S. sanctions against Tehran will continue to be implemented. “I predict that even if the Joint Comprehensive Plan of Action (JCPOA) is restarted, hundreds of sanctions will continue. The sanctions will remain unchanged, including sanctions imposed by the Trump administration.”
Phil Flynn, a senior analyst at Price Futures Group, said: “Blinken saw the reality and said that even if we do reach an agreement, there is still a long way to go, and all those who are looking forward to a surge in supply will be disappointed.”
The United States told Iran on Tuesday that it must allow the International Atomic Energy Agency (IAEA) to continue to monitor Iran’s activities, otherwise the resumption of broader negotiations on the Iranian nuclear agreement will be affected. Prior to this, the supervision agreement between IAEA and Iran was extended to June 24.
U.S. and Iranian officials are expected to begin the sixth round of indirect talks in Vienna this weekend to discuss how the two sides can resume compliance with the nuclear agreement, officially known as the Joint Comprehensive Plan of Action (JCPOA).
The Goldman Sachs Group stated that the slow progress of Iran’s nuclear agreement negotiations may also put pressure on oil supply and support oil prices. “Recent headlines in major media have comforted us. We expect the potential recovery of Iran’s oil exports to be in the autumn. Appeared. Although both the upstream OPEC+ oil producing countries and the downstream refining capacity have surplus,However, we expect the scale of OPEC+’s increase in supply will lag behind the rebound in demand。”