International oil prices closed higher for the eighth consecutive week, with Brent crude oil hitting $85/barrel again after a lapse of three years, and WTI crude oil hitting a seven-year high. Crude prices are climbing to multi-year highs as global shortages of natural gas and coal boost demand for oil. The International Energy Agency recently stated that the ongoing energy crisis is expected to increase oil demand by 500,000 barrels per day, which may trigger inflation and slow down the global economic recovery. In its monthly report, the International Energy Agency raised its forecast for global oil demand growth in 2021 and 2022 by 170,000 barrels/day and 210,000 barrels/day respectively. It is currently expected that total global oil demand will reach 99.6 million barrels/day in 2022. On the same day, it was slightly higher than the pre-COVID-19 level, which also allowed oil prices to maintain a continued strong pattern.
The continued rise in prices of various energy sources has promoted the overall rise of the entire commodity market, and energy-intensive commodities have increased with the investment The continued rise in costs has led to sharp price increases. This week, many products including thermal coal, chemicals, metals, cotton, etc. have frequently reached daily limit. However, we have also noticed that while commodities have risen sharply, they have also begun to fluctuate significantly. Rising energy prices have also intensified inflationary pressures. Coupled with power outages, this has led to a reduction in industrial activity and a slowdown in economic recovery. The commodity market has obvious overheating characteristics. Risks are amplifying dramatically.
The crude oil market supply and demand outlook pushes up oil prices
In the past week, major institutions have successively updated their latest monthly reports. The International Energy Agency revised its assessment of crude oil market demand in the report. After continuously lowering its crude oil market demand expectations in the past two months, in this month’s report, the International Energy Agency (IEA) has raised its forecast for global oil demand growth in 2021 and 2022 by 170,000 barrels/day and 210,000 barrels/day respectively, believing that global oil demand will increase by 5.5 million barrels/day in 2021 and 3.3 million barrels in 2022. Barrels/day? This data is relatively close to the 5.8 million barrels/day figure in OPEC’s monthly report after it lowered its 2021 demand growth forecast by 140,000 barrels/day. The International Energy Agency stressed that the global energy crunch is expected to increase oil demand by 500,000 barrels per day, and may stimulate inflation and slow down the global recovery from the new crown epidemic. “Record-high coal and natural gas prices and power outages are prompting the power sector and energy-intensive industries to turn to oil to keep lights on and production running,” the IEA said in its monthly oil report. p>
The IEA monthly report shows that global oil supply has resumed an upward trend as OPEC+ lifts production cuts, the United States recovers from Hurricane Ida and maintenance work ends, but the crude oil production of oil-producing country group OPEC+ in the fourth quarter of this year Demand will be 700,000 barrels per day below forecast demand, with shortages of natural gas, liquefied natural gas and coal likely to keep the oil market short of demand until at least the end of the year. By the second quarter of 2022, OPEC+’s effective spare capacity may fall below 4 million barrels per day, compared with 9 million barrels per day in the first quarter of 2021. The IEA monthly report highlights that global spare capacity is shrinking, indicating the need for increased investment to meet future demand.
In response to calls from global consuming countries to speed up oil production increases, Saudi Arabia said that it and its allies have worked hard enough and protected the oil market from dramatic price fluctuations in natural gas and coal markets. “We are now seeing a 29% increase in oil market prices, but a 500% increase in gas prices, a 300% increase in coal prices, and a 200% increase in LNG prices,” the Saudi energy minister told a forum in Moscow on Thursday. Although oil prices have jumped to a three-year high of over US$80/barrel, they pale in comparison to the sharp fluctuations in prices such as natural gas and coal.” He reiterated that OPEC+ should insist on a gradual and phased approach to restart idle oil and gas. production capacity. OPEC+, formed by OPEC and its oil-producing allies led by Russia, has done an “excellent” job as the so-called “oil market regulator”.
OPEC Secretary-General Barkindo said on Thursday that the market is operating in accordance with supply and demand fundamentals. But it must be admitted that there are some external factors that are affecting the development of the market. In terms of how the COVID-19 pandemic has created uncertainty, Barkindo said there is uncertainty with the emergence of various variants, mutations, government responses and how the world will increase vaccination rates, especially in developing countries. The existence of certainty makes OPEC+ afraid to increase production significantly.
Although the market is more worried about the shortage of supply in the context of the energy crisis, in fact the market has begun to show some seasonal negative factors. The latest data released by the U.S. EIA shows that the increase in U.S. commercial crude oil inventories excluding strategic reserves in the week ended October 8 was much higher than expected. EIA crude oil inventories increased by 6.088 million barrels that week, an increase of 1.05 million barrels was expected, and the previous value increased by 2.345 million barrels. Barrels, this is the third consecutive week that crude oil inventories have accumulated in the United States. The increase in EIA crude oil inventories this week was the largest since the week of March 5, 2021. In addition, U.S. crude oil production activities have also begun to show significant acceleration. Data released by Baker Hughes showed that the number of U.S. oil rigs increased by 12 units in the past week, far exceeding expectations. The growth rate continues to increase. U.S. drilling companies increased oil drilling for the sixth consecutive week. and natural gas drillingThe platform shows that high oil prices have a significant incentive effect on the supply side to increase production.
Oil prices around $80/barrel have once again spurred a recovery in production from the largest U.S. shale oil field, with output expected to return to pre-pandemic levels within weeks. High Point. Only this time, it’s private operators, rather than the previously listed companies, driving production. They see no reason to slow down. Rystad Energy predicts that Permian Basin production could reach the pre-pandemic record high of 4.9 million barrels per day as soon as this month and continue to climb steadily in 2022 as the private fleet heats up. The Permian is a particularly attractive location, primarily because of its low break-even costs and high productivity.
Macro and industrial funds show expectations Difference
Because the energy crisis hype continues to heat up, it has also attracted funds to accelerate the accumulation of long positions in crude oil since September. However, investors in different markets showed differences in expectations in the past week. As of the week of October 12, speculators’ net long positions in NYMEX WTI crude oil increased by 10,448 contracts to 326,605 contracts, while speculation in Brent crude oil futures during the same period Net long positions decreased by 31,756 contracts to 300,921 contracts. This difference in speculative long changes is also very obvious in oil price fluctuations. Although oil prices continue to rise as a whole, the overall performance of WTI oil prices in the past week has been significantly stronger than that of the Brent market. This is also in line with the increase in funds between the two different markets. minus changes. In addition, we can see this change from the monthly difference between WTI crude oil and Brent crude oil. Obviously, the monthly difference between Brent crude oil, which is relatively closer to the physical market, fell slightly, indicating that the physical market is relatively restrained on prices, especially including In order to compete for market share, countries such as Saudi Arabia and Iraq have targetedly lowered premiums and discounts and ensured supply in order to win more customers. This has also depressed Brent performance. However, Wall Street hedge funds from the macro level and the energy crisis perspective Obviously more optimistic, the recent move to buy crude oil has become more obvious, which has also made WTI crude oil’s performance significantly stronger than Brent’s performance in the past week.
Overall, natural gas and coal shortages have led to rising demand for petroleum products in the power market, leading to an increasing number of institutions , oil-producing countries are raising their outlook for crude oil market demand, and countries including Qatar and Saudi Arabia have also expressed their inability to cope with rising oil prices. Abundant macro liquidity and energy crisis speculation have fully stimulated investors’ psychological expectations, laying the foundation for the strength of oil prices. set the tone. Although we have also seen that there are some uncertain negative factors in the crude oil market, until the energy crisis is effectively resolved, investors will still pay more attention to the positive factors. In this context, it is difficult for oil prices to see a large-scale correction. </p
