Expected changes in supply and demand lead to plummeting international oil prices-Xinhuanet

Xinhua News Agency, New York, July 19th, title: Expected changes in supply and demand lead to plummeting international oil prices

Xinhua News Agency reporter Liu Yanan

Affected by factors such as the agreement of major oil-producing countries on increasing production plans and the increasing market concerns about the new crown epidemic, the price of international crude oil futures plummeted on the 19th, closing down sharply by more than 6%. Analysts believe that the gradual increase in production agreement reached by major oil-producing countries will not cause a significant increase in market supply in the short term, but will help stabilize market expectations. The biggest variable facing the oil price outlook is still the global epidemic trend.

As of the close of the day, the price of light crude oil futures for August delivery on the New York Mercantile Exchange fell by US$5.39 to close at US$66.42 per barrel, a decrease of 7.51%, the largest single-day drop since September 8 last year; The price of London Brent crude oil futures fell 4.97 US dollars to close at 68.62 US dollars per barrel, a decline of 6.75%, the largest single-day drop since March 18 this year.

The ministerial meeting of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC oil-producing countries that ended on the 18th decided to extend the current production reduction agreement that was originally scheduled to expire in April 2022 to the end of 2022, and start every month from August this year. Increase the daily average production by 400,000 barrels. In addition, the meeting also decided to raise the production baselines of the UAE, Saudi Arabia, Russia, Kuwait, and Iraq starting in May 2022, with a total increase of 1.632 million barrels.

Many analysts believe that although OPEC has reached an agreement with non-OPEC oil-producing countries to increase production, the increase in output will be limited in the short term, market supply will not increase significantly, and the downward pressure on oil prices will not be large. On the other hand, the conclusion of the agreement means that the domestic divergence of major oil producers has been resolved, which will help stabilize the market’s expectations for future supply.

Helima Croft, head of global commodity strategy at Royal Bank of Canada, believes that the market can absorb the 400,000 barrels of daily increase in crude oil supply per month.

Commerzbank analyst Eugen Weinberg said that the agreement reached between OPEC and non-OPEC oil-producing countries has resolved internal differences and helped restore investor confidence and expectations, which is good for oil prices.

After the announcement of the agreement, Credit Suisse raised its 2021 average price forecast for the first line of Brent crude oil futures to $70 per barrel from the previous $66.5 per barrel. The average price of the first line of New York crude oil futures contracts was forecast from 62 per barrel. The US dollar was raised to 67 US dollars per barrel. Citigroup expects that Brent and New York crude oil futures prices will rise to $85 per barrel or higher within this year.

Analysts believe that the market is more sensitive to the trend of the new crown epidemic and its impact on demand than the agreement reached by major oil-producing countries to increase production.

Troy Vincent, a market analyst at DTN, a U.S. market service agency, believes that the spread of the mutated new crown virus delta strain not only dilutes the benefits of the expected stability of crude oil supply, but also has a broader impact on the macro market, which has a broader impact on oil prices. unfavorable.

Phil Flynn, senior market analyst at the US Price Futures Group, said that OPEC’s agreement with partner countries should have supported oil prices, but market concerns about the spread of Delta strains have increased, leading to increased risk aversion among investors. International oil prices are under pressure.

Vincent expects that the strengthening of the U.S. dollar, the weakening of the global economic recovery, and the increase in crude oil production of major oil-producing countries will curb the upward trend of crude oil prices in the second half of this year.