Abdelmajid attar, Algerian Energy Minister under OPECs rotating presidency, said in his opening speech that it is clear that global deployment of vaccines will take time, and the effect may begin to show in the second half of 2021. He expects oil demand to remain weak in the first quarter of 2021.
According to the original plan, OPEC will reduce the production reduction agreement from 7.7 million barrels / day to 5.7 million barrels / day from January next year. The new round of sudden epidemic situation has impacted energy demand. All parties are discussing a series of options, including the extension of production reduction order for three months. This has been agreed by most oil producing countries including Saudi Arabia, but the call for gradually increasing production has also been obtained There was a lot of support.
Russias attitude is wavering and tends to increase production capacity gradually. Dmitry Peskov, a Kremlin spokesman, said on Monday that the differences between Russia and OPEC were not as serious as in early 2020, when talks broke down and production surged. He then said Putin had no plans to talk to Saudi leaders before the OPEC + meeting, a move that has often helped to ease differences between the two major oil producing countries.
The outbreak has put the once relaxed energy supply-demand relationship under test again. In its monthly market report released last month, OPEC lowered its global oil demand forecast for 2021. Next year, oil demand will increase by 6.2 million barrels, down another 300000 barrels compared with the report in October, and the forecast in July this year is 7 million barrels. OPEC believes that the expected reduction mainly takes into account the adverse impact of the world economic outlook. With the continued rise in infection cases in the United States and Europe in October, forcing governments to re introduce some restrictive measures, various energy needs, including transportation fuel, are believed to be the first to suffer. According to the report.
The recovery of production capacity in the United States is also becoming a threat. Last week, the international oil price once hit a new high since March, which promoted the rapid recovery of the number of drilling platforms in the United States. According to Baker Hughes, an oil service giant, the total number of active platforms in the United States has risen to the highest level since May. Producers are back on the market, and the EIA of the US Energy Information Administration said US crude oil production had returned to 11 million barrels per day last week.
At the informal discussions of oil producing countries held last weekend, most participants supported maintaining the current production restriction level until the first quarter. The media quoted representatives as saying that the recent rebound in oil prices is only due to the popularity of vaccines, but it is still necessary to expand the market base to support prices in the future. The best choice is to extend the agreement for three months, but the UAE and Kazakhstan have raised objections to this.
On the other hand, Saudi Arabia and Saudi Arabia may not be able to meet the demand of reducing oil production in the first quarter to make up for the difference. And the leaders of the two countries seem to be impatient with the measures to reduce production. Nigeria has previously demanded to increase production quotas on the basis of domestic economic pressure.
Cautious and optimistic institutions
In the short term, market uncertainty caused by the epidemic remains. If the novel coronavirus pneumonia vaccine can be launched quickly and widely vaccinated, it may promote the global economic outlook and stimulate demand for oil.
Boosted by the vaccine news, investors enthusiasm for the economic outlook has been ignited. Brent crude oil and WTI crude oil rose more than 25% in November, making the second largest monthly increase in the year. The latest round of blockade policies in the United States and Europe are not as strict as in the spring, and the damage to economic activities is smaller. In addition, the recent recovery of the Asian economy has increased the procurement of crude oil, and the overall energy demand situation has not deteriorated rapidly. In addition, it is widely expected that a weaker US dollar will further support oil prices if low US interest rates and a huge stimulus package become a reality in the coming months.
Citigroup is relatively cautious and believes that the prospect of international crude oil supply and demand in 2021 is still grim for oil market bulls. Although vaccine research and development is making breakthroughs, achieving universal immunization is still a long way to go. Before that, the epidemic will continue to spread. At the same time, many industries, such as aviation and tourism, have been severely damaged during the outbreak. Even if the virus disappears, it will take a long time to recover, which will still constitute a lasting drag on the oil market demand. On the contrary, the further capacity recovery of OPEC + countries in 2021 seems unstoppable.
Against the background of the above situation, Citigroup further revised its original oil price forecast. It is estimated that the average price of Brent and WTI crude oil in 2021 will be only $54 and $49, about 25% higher than the current price. Varga told first finance reporters that the results of the meeting will set the tone for oil prices in the coming months. Given the weak demand fundamentals, it is believed that OPEC will eventually postpone its production increase plan in January. If the negotiation breaks down and OPEC continues to push forward the production increase plan of 2 million barrels / day, the supply and demand situation will face the risk of imbalance. It is necessary to be alert to the short-term market sentiment risk, which may cause the short-term oil price to plummet. Deutsche Banks latest forecast is that if OPEC fails to delay production cuts, international oil prices will plunge by 10%. Source of this article: Yang Bin, editor in charge of the first finance and Economics_ NF4368
Against the background of the above situation, Citigroup further revised its original oil price forecast. It is estimated that the average price of Brent and WTI crude oil in 2021 will be only $54 and $49, about 25% higher than the current price.
Varga told first finance reporters that the results of the meeting will set the tone for oil prices in the coming months. Given the weak demand fundamentals, it is believed that OPEC will eventually postpone its production increase plan in January. If the negotiation breaks down and OPEC continues to push forward the production increase plan of 2 million barrels / day, the supply and demand situation will face the risk of imbalance. It is necessary to be alert to the short-term market sentiment risk, which may cause the short-term oil price to plummet.