In the current market, investors are most concerned about demand. Supply side efforts have stopped the decline, but as long as demand does not rise, crude oil prices will have little room to rise. At present, there is no obvious turning point signal in the development of the global epidemic, and the optimistic attitude that the market expects the epidemic will be significantly improved in June will gradually dissipate with the passage of time.
At present, most of the hope for the prevention and control of the epidemic lies in the recovery of temperature. If the hot weather can prevent the spread of the virus, then we believe that the epidemic will be controlled soon, otherwise the recovery of demand is still far away. Therefore, we can take the demand as the reference of the top range of crude oil price and the supply as the reference of the bottom range.
In the OPEC monthly report, investors are most concerned about demand. From the perspective of OPECs outlook on global crude oil demand, OECD countries demand is expected to decline by 5.2 million barrels / day, including 2.34 million barrels / day in the United States, 1.64 million barrels / day in Europe and 950000 barrels / day in China. The global crude oil demand in 2020 will be 9.08 million barrels / day lower than that in 2019.
However, from the perspective of the latest OPEC crude oil production, OPEC countries in April were not very generous. In the case of such a weak crude oil price, the overall production still increased significantly. The total crude oil production in April increased by 1798000 barrels / day, reaching 30.412 million barrels / day. In terms of countries, Saudi Arabias crude oil production soared by 1.556 million barrels / day, returning to 11.5 million barrels / day again, creating the highest output in nearly 20 years. Saudi Arabia is also telling us with practical actions that if we do not reduce production, Saudi Arabia has enough capacity to completely destroy this market. UAE crude oil production increased 332700 barrels / day, Kuwait crude oil production increased 259000 barrels / day.
Fortunately, however, the output growth in April was retaliatory and was also preparing for the production reduction in May. In the May production reduction agreement, OPEC+ has cut production by 9 million 700 thousand barrels per day, OPEC has reduced production by 6 million 80 thousand barrels per day, and the output after production has been 20 million 598 thousand barrels / day, that is to say, it will drop 9 million 814 thousand barrels / day awesome than April crude oil output. Non OPEC countries undertake 3.61 million barrels / day of production reduction, of which Russia has the largest production reduction, reaching 2.5 million barrels / day. In addition, the OPEC monthly report also predicted that non OPEC countries would increase their crude oil supply by - 3.5 million barrels / day in 2020, compared with - 1.5 million barrels / day previously.
Although the demand level shown by OPEC monthly report is not very good, the supply level is actually good. At present, Saudi Arabia has increased the official price of crude oil, especially the price of crude oil sold to Europe. Saudi Arabia also said it would significantly reduce the amount of crude oil sold to Europe and the United States because of a lack of share due to production cuts. Saudi Arabia is trying to use the driving force of Brent and WTI spot market to drive the price recovery.
EIAs short-term energy outlook also lowered global crude oil demand expectations: the total global crude oil consumption is expected to be 92.59 million barrels / day in 2020, 95.52 million barrels / day previously, and 99.53 million barrels / day in 2021, 101.93 million barrels / day previously; the total US crude oil consumption is expected to be 18.27 million barrels / day in 2020, 19.13 million barrels / day previously, and 2021 The total consumption of crude oil in the United States is 1972 million barrels / day, which is expected to be 20.39 million barrels / day.
In terms of production, EIA expects us crude oil production to be 11.69 million barrels / day in 2020, 11.76 million barrels / day previously, 10.9 million barrels / day in 2021 and 11.03 million barrels / day previously.
In terms of price, EIA forecasts that Brent crude oil will average $34 / barrel this year, which is lower than last years average of $64 / barrel. It expects that Brent crude oil will average $23 / barrel in the second quarter of this year and rise to $32 / barrel in the second half of this year. EIA forecasts that the average Brent crude oil price will rise to 48 USD / barrel by 2021, 2 USD / barrel higher than last months forecast; the WTI crude oil price in 2020 is expected to be thirty point one USD / barrel, previously expected twenty-nine point three four USD / barrel; estimated WTI crude oil price in 2021 is forty-three point three one USD / barrel, previously expected forty-one point one two USD / barrel.
Looking at the EIA report, we mainly see the EIAs market outlook for the future. From the perspective of the supply and demand balance sheet, the market is in a serious state of excess in the first and second quarters, and in a state of supply shortage in the third and fourth quarters. The main logic is the rapid recovery of demand in the third quarter and the relatively low crude oil production in the second and third quarters. The whole 2021 crude oil market will be in a state of relatively tight supply.
In terms of months, the market surplus in the second quarter is mainly concentrated in April and may. There will still be a small amount of surplus in June, but the overall degree of surplus will be greatly eased. After July, the market gradually entered a state of supply shortage, which is expected to last for a long time. Therefore, from the perspective of the balance sheet, the market fundamentals gradually eased in May, but it is still in the state of surplus. Entering June, the market will reach the state of supply and demand balance, and the overall market is expected to be relatively optimistic.
EIA crude weekly report
This EIA weekly crude oil report has two highlights: crude oil production and US crude oil inventory. In terms of crude oil production, the output of the United States fell by 300000 barrels / day last week. After the decline speed of 100000 barrels / day for several consecutive weeks, the previous weeks decline data was 200000 barrels / day, and the last weeks decline data was 300000 barrels / day. The decline has accelerated momentum. Current crude oil production has fallen to 2018 level, and it is expected that low oil prices will continue to affect US crude oil production.
From the demand side, this weeks data is not very ideal. After a slow recovery, the operating rate and refining input of US refineries fell to the previous low again. But recently, we have also seen that the proportion of U.S. resumption of work is expanding. Although the epidemic is serious, at least in the short term, it can support the stabilization of crude oil demand. We dont know whether the U.S. is drinking poison to quench thirst, but at least in the short term, crude oil demand has seen the trace of bottoming out.
Inventory was the biggest positive for the week. The rising US commercial crude oil inventory and Cushing crude oil inventory both declined slightly this week, and the markets worries about the expansion of the reservoir were greatly eased. But whether this weeks data is really the inflection point of inventory needs to be verified by next weeks data. If the refinery operating rate and refining input can stop falling and pick up next week, the crude oil inventory level in the United States will maintain a downward trend, which will play a strong supporting role in the market.
In addition, look at the U.S. oil product inventory. Gasoline inventory has declined a lot, but diesel inventory still maintained a large rise, mainly because the U.S. economy has not yet fully recovered. But as States return to work, U.S. diesel demand is expected to pick up and diesel inventories will stop rising.
To sum up, next weeks focus will be on US crude oil inventory levels and price performance. If the U.S. crude oil inventory can still decline next week, the U.S. crude oil commercial inventory rate will enter the cycle of destocking, which will play a strong role in the later price support. From the perspective of price pattern, WTI oil price has broken through the previous high, which is optimistic, but Brent oil price is still a step away from the previous high. If Brent oil price can also break through the previous high next week, the price upward path will be relatively smooth. Therefore, investors with strategic investment needs can properly arrange multiple orders and wait for the substantial verification of the rise.
However, both the OPEC report and the EIA report predict that the situation will be greatly improved in June. Therefore, if the improvement in the supply and demand level is gradually confirmed, it will be difficult for oil prices to provide more comfortable opportunities for long drivers before the end of May. Im afraid that there will be no suitable price after June. Therefore, in addition to paying attention to the absolute price, we should also pay attention to the time factor. At present, we can see the market after June The market will be more optimistic. (author unit: Haitong futures)
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