With the recovery of the global economy and the abnormal fluctuations in global natural gas prices, the recent internationalOil priceHas become a hot topic around the world. Recall that there was a negative oil price in international oil prices last year, but this year oil prices have been on the cloud. U.S. crude oil prices have been soaring this week, breaking through the $80 mark, hitting $82 at one time, setting a 7-year high.
As of 0:10 on October 16, Beijing time, the price of WTI crude oil futures was US$81.63 per barrel, an increase of 1.26%. Brent crude oil futures stood at US$85/barrel, the first time since October 2018, and rose more than 1% in the day. Under this circumstance, the United States is not calm. US officials said that the country has kept a close watch on the soaring oil price and is currently thinking about ways to alleviate the problem.
Europe’s energy problems are getting worse
With the increase in demand for crude oil, US crude oil prices have risen by 68.6% so far this year. Judging from the current trend, this does not seem to be enough. Recently, when attending a panel discussion on Russia’s Energy Week, Putin said that as global demand for oil continues to soar and supply continues to be tight, oil prices may reach US$100 per barrel.
Regarding the current energy problems facing the world, as a member of the OPEC+ alliance, although Russia is ready to provide additional natural gas to Europe and other countries to overcome the energy Price has a great boost. At the same time, due to the sharp rise in crude oil, the United States has been urging OPEC+ to increase crude oil production since August, hoping to stop the frantic rise in international oil prices.
However, what the United States did not expect was that OPEC+ not only ignored U.S. requirements, but many member states quietly reduced production. The International Energy Agency report shows that the overall implementation level of OPEC+’s September production reduction agreement is 116%. That is to say, OPEC+’s crude oil supply has not reached the predetermined crude oil supply scale and only increased production by 340,000 barrels per day.
The International Energy Agency (IEA) pointed out in its monthly report that record coal and natural gas prices and rotating power outages are promptingPower IndustryAnd energy-intensive industries are turning to oil to keep electricity supply and operations normal.Even though it includesCitigroupMany withinBankDue to the fuel shift, crude oil price expectations have been raised, but OPEC and its allies will still take a gradual approach to resume supply growth.
In the past few months, natural gas prices have soared, and European energy problems have become increasingly serious. EU officials stated that EU natural gas inventories have reached the lowest level in nearly a decade. At the same time, the UK continues to have energy companies facing bankruptcy. European natural gas prices have soared by nearly 600% this year. The soaring energy prices have reduced industrial production, and European residents have also faced higher heating bills.
Yide FuturesAnalystChen Tong told a reporter from China Times that OPEC leader Saudi Arabia stated that it has worked hard with its allies and protected the oil market from the violent fluctuations in natural gas and coal market prices. As a “so-called oil market regulator,” it has already Did an “excellent” job. OPEC will continue to increase production in a gradual and phased manner in accordance with the original plan, without additional supply.
On October 14, Barkindu, Secretary-General of the Organization of Petroleum Exporting Countries, stated that the market is operating in accordance with the fundamentals of supply and demand. But we must admit that there are some external factors that are affecting the development of the market. Regarding how the new crown epidemic causes uncertainty, Barkin pointed out that with the emergence of various variants and mutations, the response of governments and how the world will increase the vaccination rate, especially in developing countries, there are uncertainties.
The existence of uncertainty makes OPEC+ do not dare to let go of a substantial increase in production. At the same time, Saudi Energy Minister Prince Abdulaziz said that OPEC+ will increase production by 400,000 barrels per day in November, and then continue to increase supply in the next few months, but it is obvious that such a pace of increase in production will not make the market. Satisfaction has led to higher and higher expectations of the market for oil prices.
OPEC said that although soaring natural gas prices may encourage consumers to shift to demand for oil, such as using oil for power generation, high oil prices may inhibit oil demand in other areas, such as oil refining. In addition, OPEC also pointed out that the actual consumption data earlier this year was weaker than expected. Therefore, it is recommended that member countries pay close attention to the market and that producers are vigilant about market fundamentals.
Zhong Meiyan, director of Everbright Energy and Chemicals, told a reporter from China Times that, as international oil prices continue to hit new highs, Chinese demand has declined. China’s September crude oil imports fell by 15.3% compared with the same period last year. Consumption of inventory, while quotas continue to curb imports. China’s September crude oil imports were 41.051 million tons, or about 9.99 million barrels per day. In August this year, imports were 10.49 million barrels per day, compared with 11.8 million barrels per day in September last year. Crude oil quotas in the fourth quarter have just been released, and the fourth batch of crude oil import allowances for non-state trade in 2021 will total 14.89 million tons. Covering the first three batches, a total of 177.14 million tons have been issued this year, a decrease of 4.02% from last year’s 184.55 million tons.
U.S. shale oil production expansion blocked
On October 14, the International Energy Agency (IEA) stated that the global energy shortage is expected to increase oil demand by 500,000 barrels per day, and may stimulate inflation and slow the global recovery from the new crown epidemic. IEA pointed out in its monthly oil report that record high coal and natural gas prices and power outages are prompting the power sector and energy-intensive industries to switch to oil to maintain lighting and production operations.
However, high energy prices may exacerbate inflation, coupled with the impact of power outages, thereby reducing industrial activity and slowing economic recovery. The IEA estimates that OPEC+’s crude oil production in the fourth quarter of this year will be 700,000 barrels per day lower than the estimated demand, which means that the situation of short supply will continue at least until the end of 2021. The IEA said the surge in demand in the past quarter resulted in the largest drop in petroleum product inventories in eight years, while inventories in OECD countries were at their lowest levels since the beginning of 2015.
Zhong Meiyan told a reporter from China Times that the center of gravity of international oil prices has shifted this week. From a data perspective, the changes in EIA crude oil inventories in the United States as of October 8 actually announced an increase of 6.088 million barrels, which is expected to increase by 1.05 million barrels. An increase of 2.345 million barrels.gasolineInventory-1.96 million barrels, distillate inventory–20 thousand barrels.
In addition, the U.S. crude oil inventory in the Cushing region fell by 1.968 million barrels in the week as of October 8, the highest since the week of June 11, 2021. API US crude oil inventories increased last week, while gasoline and distillate inventories also fell. US crude oil inventories increased by 5.2 million barrels, gasoline inventories decreased by 4.6 million barrels, and distillate inventories decreased by 2.7 million barrels. The overall inventory data is still biased towards strong demand.
According to Chen Tong, the IEA stated in its monthly report that record high coal and natural gas prices are prompting the power sector and energy-intensive industries to switch to oil. Therefore, oil demand forecasts for 2021 and 2022 are raised by 170,000 barrels per day and respectively. 210,000 barrels/day, OPEC+’s crude oil production in the fourth quarter of this year will be 700,000 barrels/day lower than the estimated demand, which means that the situation of short supply will continue at least until the end of 2021.
Affected by the optimistic expectations of the IEA monthly report, Brent crude oil futures stood at $85/barrel. In the fourth quarter, oil and gas substitution is expected to boost crude oil demand by about 500,000 barrels per day, but China’s dual control and power curtailment policies are expected to reduce crude oil demand by 350,000 barrels per day. However, as seasonal increases and the impact of the epidemic subsides, crude oil demand is expected to increase month-on-month There will still be an increase of 1.5 million barrels per day in the third quarter.
In this context, Wall Street investment banks are also optimistic about the oil prospects.Goldman SachsDamien Courvalin, head of energy research, said that as demand rebounds and supply remains tight, oil prices may remain at a relatively high level in the next few years. Market fundamentals support higher oil prices. The price of Brent crude oil is expected to be US$85 per barrel in the next few years. This is not like natural gas, which is a short winter shock.
This is actually the beginning of the rise in oil prices. It is predicted that by the end of this year, the price of Brent crude oil will reach US$90 per barrel. Courvalin said the oil market is in “the biggest gap in decades,” and winter demand will continue to exceed supply. While demand is growing, the lack of investment in upstream oil supply indicates that oil prices will continue to rise for at least the next year.
In addition, TD Securities stated that the bull market in oil prices has not yet ended, and Brent crude oil may soar to $100/barrel. It is expected that there will be a global supply gap in the last three months of 2021, and a supply gap may also appear in the early winter months of 2022. As the distillate stocks in Europe and Asia are lower than the 5-year average and are also significantly lower than normal natural gas stocks, an abnormally cold winter may significantly increase the demand for petroleum products, and Brent crude oil may reach it within a period of time Above US$100/barrel, fuel oil will also strengthen.
EdCrooks, vice chairman of the Americas of Wood Mackenzie, an international energy research company, pointed out that U.S. oil demand is at the forefront of recovery.Refined oilDemand is close to a record high of approximately 21 million barrels per day. Although the epidemic is still raging, global oil demand continues to recover at a healthy rate. The epidemic is still a factor affecting the global oil market, but “its impact on the world economy and energy demand is fading.”
On the supply side, Saudi Arabia, the leader of the Organization of Petroleum Exporting Countries (OPEC), ignored the call for accelerating oil production. OPEC will continue to adopt a gradual and phased approach to increase supply as planned. On the demand side, last week’s economic data was relatively optimistic, and the WTO raised today and tomorrow. Two years of global economic expectations, the US bond default risk temporarily eased, so that crude oil demand is expected to improve.
Chen Tong said that the shortage of global natural gas supply and the soaring price of natural gas in Europe prompted power generation companies to switch to oil for power generation, which also raised the demand for crude oil for power generation this winter. Overall, we believe that the oil market will still be in a state of supply shortage in the fourth quarter. In extremely cold weather, Brent oil prices may rush to over US$90/barrel.
Faced with the sharp rise in oil prices, EQT Corp., the largest natural gas driller in the United States, once again called for more investment in domestic infrastructure (such as pipelines) and said it would help increase exports and alleviate energy shortages. EQT CEO Toby Rice said on Thursday that if it were not for pipeline and export restrictions, US natural gas drillers could increase their supply by about 20%.
Rice said that the new opportunities for natural gas drilling in the United States will also help accelerate the elimination of polluting energy sources dominated by coal. As environmental organizations, regulatory agencies, and landowners block the installation of facilities designed to deliver more fuel to domestic and foreign markets, the US natural gas pipeline projects have frequently frustrated, which has also become an Achilles heel that hinders the boom in shale gas.
In the past few years, a series of pipeline plans to transport natural gas from the abundant Appalachian region have been cancelled. The Appalachian Basin is located in the northeastern part of the United States and is the largest shale gas reservoir in North America. Since 2008, shale gas production in the Appalachian Basin has continued to grow, and in recent years, monthly production has continued to hit new highs.
According to EIA data, in the first half of this year, the production of the Appalachian Basin has accounted for 34% of the US dry gas production, and it has successfully ranked as the third largest natural gas production basin in the world. Last month, the pipeline company PennEast Pipeline Co. (A joint venture of five companies including Southern Co. and Enbridge Inc.) stopped the development of a proposed 116-mile (187-kilometer) pipeline after failing to obtain a permit.
(Source: China Times)
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