Original title: OPEC unexpectedly releases “surprise” Nicholas has set off another storm, and the call for oil prices of $100 is revived
The market’s confidence in the oil market has once again greatly increased, and the call for oil prices to rise to $100 has resumed.
The aftermath of Hurricane “Ada” has not yet subsided, and another storm of “Nicholas” has revived, adding fire to the relatively strong oil prices recently.
At the same time, OPEC also unexpectedly released a “surprise” and raised its crude oil demand forecast in the latest monthly report. Although OPEC member countries resume idle production capacity, the world will continue to face a shortage of oil supply in the coming months.
With multiple positive assists from the Hurricanes and OPEC, U.S. oil broke through the $70 mark in one fell swoop on September 13. WTI crude oil for October delivery on the New York Mercantile Exchange rose 73 cents, or nearly 1.1%, to close at $70.45 per barrel, the highest closing price since August 3. Oil prices continued to rise slightly on the 14th.
OPEC unexpectedly releases “surprise”
As the epidemic is still suppressing global crude oil demand, analysts have generally predicted that OPEC will release pessimistic expectations. However, OPEC exceeded market expectations and continued to be optimistic about future crude oil demand in the monthly report.
In the latest monthly report released on September 13, OPEC raised its annual oil demand growth forecast for 2021 by 110,000 barrels per day, and at the same time significantly raised its oil demand forecast for 2022 by 980,000 barrels per day to 100.8 million barrels per day. , Higher than the demand level of 100.3 million barrels per day in 2019, which also means that the demand for crude oil next year will exceed that before the epidemic.
“As the vaccination rate continues to rise and the public is more and more confident in the government’s ability to control the new crown epidemic, which will promote the recovery of travel, global oil demand will exceed the level before the epidemic next year.” OPEC said in its monthly report.
In the short term, global demand for crude oil is slightly weaker. OPEC expects that the delta strain will temporarily suppress oil demand and lower its global oil demand forecast for the fourth quarter of 2021 by 110,000 barrels per day to 99.7 million barrels per day. However, overall the market is still in short supply. Due to the interruption of production in other regions, the demand for OPEC crude oil is expected to increase.
In addition, due to the impact of Hurricane Ida on US oil production, OPEC lowered its forecast for supply growth from non-OPEC oil-producing countries this year by 200,000 barrels per day, while maintaining its forecast for supply growth from non-OPEC oil-producing countries next year.
Overall, OPEC’s forecast indicates that the oil market will become tighter. After the highly contagious Delta virus drags on the recovery this year, the pace of recovery in oil demand is expected to be stronger than before, and the recovery is expected to occur mainly in 2022. “It is expected that in 2022, the vaccination rate will rise and the public’s confidence in the government’s control of the new crown epidemic will also become more common, which will further support the recovery of oil demand, especially for transportation fuels.”
Similar to OPEC, the International Energy Agency (IEA) also stated in its latest monthly report on the 14th that it is expected that this year’s trend of shrinking oil market inventories will continue. Fuel inventories in advanced economies fell by 30 million barrels last month, which is 186 million barrels lower than the five-year average. This month, there should be another “significant contraction”.
Ada’s storm is not over, Nicholas storm rises again
In addition to the overall demand outlook, the reduction in supply caused by the hurricane has also been a huge driver of the recent increase in oil prices.
In late August and early September, Hurricane Ada caused severe damage to oil production and refining facilities. According to the latest data released by the US Bureau of Security and Environmental Enforcement (BSEE) on September 13, two weeks after the Ada invasion, it is estimated that 43.6% of oil production capacity and 51.6% of natural gas production capacity in the Gulf of Mexico are still closed.
Tony Sycamore, a senior analyst at Jiasheng Group, told the 21st Century Business Herald that two weeks after Hurricane Ida made landfall, nearly half of the crude oil output in the Gulf of Mexico in the United States has not yet restarted. The net bullish impact of Hurricane Ida on the supply and demand of crude oil in the United States and the world is unique. Ida is estimated to have reduced total inventories by 30 million barrels, exceeding the 15 million barrels of strategic reserve crude oil estimated to be sold in October by the United States.
JPMorgan Chase also lamented, “In the tropical cyclone activity of the past ten years, no such hurricane has caused numerous Gulf of Mexico crude oil production capacity to stall for so long, bringing the crude oil market into an unprecedented situation.”
While Ida’s influence has not dissipated, Hurricane Nicholas once again set off torrential rains and became a new threat to disrupt oil production in the U.S. Gulf of Mexico. The National Hurricane Center (NHC) said on September 14 that Hurricane Nicholas had made landfall on the coast of Texas.
Gulf of Mexico oil companies are making every effort to cope with the threat of hurricanes. Royal Dutch Shell, the world’s second largest oil company, has been evacuating workers on an oil platform in the U.S. Gulf of Mexico since the 13th, and other companies are also responsible for the second storm in the Gulf of Mexico in a few weeks. Prepare for the hurricane-level wind.
The refinery is also ready for a new hurricane. Phillips 66 launched a hurricane response plan at the refinery in Sweeney, Texas and the Lake Charles refinery in Louisiana; ExxonMobil’s Baytown and Beaumont petrochemical plants in Texas were well prepared Preparation for the weather.
“After Hurricane Ida, concerns about U.S. energy supply still loomed over the market. People once mistakenly believed that the damage caused by the hurricane to the energy production infrastructure in the Gulf of Mexico could not take too long to be repaired. But in the end, it took time. It is much longer, and it may take several weeks, especially when Hurricane Nicholas appeared in the Gulf of Mexico.” Michael Hewson, chief market analyst at CMC Markets in the United Kingdom lamented.
The oil price rises to 100 dollars, the call is up again
After experiencing the latest wave of gains, the market’s confidence in the oil market has once again greatly increased, and the call for oil prices to rise to $100 has resumed.
Francisco Blanch, a commodity strategist at Bank of America, said that if the northern hemisphere’s winter is colder than ever this year, it may increase global oil demand by another 1 million to 2 million barrels per day, pushing the price of Brent crude oil to rise in the first half of 2022. 100 dollars per barrel.
At the same time, Citigroup also expressed optimism: Affected by Hurricane Ida, the US crude oil production cut in September may reach 30 million barrels, and the October production cut will also reach 5 million barrels. At the time when Ada led to a decline in US crude oil production, demand recovery in East Asia is taking place, which may support crude oil prices in the fourth quarter.
Goldman Sachs also stated in the latest report that after the fall, oil prices may rise sharply, especially if the Iran agreement breaks. The Delta virus has a limited impact on global crude oil demand. However, due to the impact of Hurricane Ida, the recovery of U.S. crude oil production continued to be lower than market expectations.
Another benefit of oil prices is that the US shale oil is currently slow to resume production. Sycamore told the 21st Century Business Herald that the subsequent increase in shale oil production is worthy of attention. With the outbreak of the new crown epidemic in 2020, the price of crude oil has dropped sharply, which has affected the production of shale oil. With the continuous development of production technology of shale oil companies, the profit and loss balance price of shale oil production areas is between 21-42 US dollars per barrel. The current oil price is completely It can cover the cost of shale oil production companies. However, due to the slow recovery of capital expenditure by shale oil companies, the number of active drilling rigs increased at a slow rate in the early stage. Although there has been a recent acceleration, it will take a long time for US crude oil production to return to pre-epidemic levels.
“The production motivation of shale oil companies has changed to a certain extent. The main limitation of capital expenditure is that investors restrict the reinvestment rate of shale oil companies in order to promote companies to generate stable free cash flow. Shale oil companies pay more attention to Return to shareholders instead of constantly digging new wells.” Sycamore explained.
The future increase in U.S. production is actually constrained by a series of factors. Sycamore told the 21st Century Business Herald reporter, “The amount of debt accumulated since the shale oil revolution is large, and the pressure to repay has hindered the expansion of capital expenditure. It is expected that as the Federal Reserve reduces debt purchases, The cost of bond financing for shale oil companies will also increase. Under the background of medium and long-term global carbon neutrality, international oil companies are gradually transitioning to new energy. Independently listed shale oil companies are facing the problem of losing investment attractiveness even if they maintain their current production behaviors. Under Biden’s new energy policy, it will be increasingly difficult for companies to obtain mining licenses in the future. All of the above factors will limit the expansion of capital expenditures by shale oil companies, which will slow down the recovery of shale oil production.”
From another perspective, when the overall sentiment of the oil market is optimistic, some analysts also remind investors to be wary of a series of potential risks. “The summer driving season in the United States is gradually over, and the United States and China plan to release strategic oil reserves, coupled with Iran’s possible resumption of oil exports, may increase (crude oil) supply.” Nissan Securities Research General Manager Hiroyuki Kikukawa warned.
(Author: Wu Bin Editor: Li Yingliang)