[ 截至9月30日的一周，全美战略原油储备环比下降140万桶至4.292亿桶，为上世纪80年代以来最低水平。 ]
As OPEC+ further tightened supply, international oil prices rebounded sharply last week, with Brent crude oil prices approaching the $95 mark once more for the first time in three weeks. But the new round of production cuts has annoyed the United States, saying OPEC+ had made a short-sighted decision.
Tamas Varga, senior market analyst at crude oil broker PVM Oil Associates, said in an interview with a reporter from China Business News that concerns regarding stagnant economic growth or even recession have become the incentive for the recent weakness in oil prices. OPEC+ once once more expressed its determination to support the market, and it can be seen that the decision to cut production is quickly reflected in prices. Since the second half of the year, the volatility of the futures market reflects that the disturbance on the demand side outweighs the impact on the supply side, but the fourth quarter may see a reversal of this trend.
The actual scale of production reduction
or regarding 1 million barrels per day
International oil prices plunged more than 20% in the third quarter, the worst performance in nearly two years, as investors worried regarding the poor outlook for demand. With crude oil prices completely reversing all of the gains since the escalation of the situation in Ukraine, OPEC+ production cuts are expected to gradually become stronger. A week before the ministerial meeting, it was reported that Russia was considering proposing to cut production by 1 million barrels per day, and on the eve of the meeting, the plan to limit production was further increased to 2 million barrels per day.
Varga told reporters that the surge in interest rate hikes triggered by inflation has slowed down manufacturing activity in various regions recently. The manufacturing PMI in the euro area fell to a 27-month low, and the manufacturing PMI in the United States was the lowest since May 2020. , a clear sign that the impact of rising interest rates on consumer demand is slowing. The shock to the economy from monetary policy is expected to continue for the foreseeable future.
To ease oil price risks, OPEC+ ministers agreed last week to cut output by 2 million barrels per day from November, the biggest drop since the pandemic in 2020. At the same time, the producers agreed to adjust the monthly meeting frequency of the Joint Ministerial Monitoring Committee (JMMC) to every two months and retain its power to convene additional meetings on an ad hoc basis to respond to changes in the energy market in a timely manner.
The two major producers, representing the alliance of oil-producing countries, reaffirmed their determination to manage the market in solidarity. Saudi Energy Minister Abdulaziz bin Salman said the production cuts were in response to a wave of interest rate hikes and a weakening global economy. Russian Deputy Prime Minister Alexander Novak said that OPEC+ agreed to strengthen the cooperation agreement until the end of 2023.
Some analysts pointed out that considering that the output of some member countries has fallen below their quota targets, the actual scale of production reduction may be reduced. Tortoise portfolio manager Rob Thummel found that OPEC+ is currently producing 3.6 million barrels per day below its existing quota, of which OPEC itself produces less than 1.2 million barrels per day, and oil-producing countries led by Russia Production was less than 2.4 million barrels. In view of this, the initial size of the actual production cut is regarding 1 million barrels per day.
Varga told reporters that while OPEC has positioned itself to ensure an appropriate pricing environment for both consumers and producers, the decision to reduce output in the current environment is likely to further squeeze tight supplies, especially Considering that the winter consumption boom is coming. He believes the production cuts are very well targeted and that OPEC+ is prioritizing prices over supply stability at a time of uncertainty in the oil market.
JPMorgan Chase expects the Biden administration to retaliate by releasing more inventories from the strategic oil reserve, but since March this year, the largest ever dumping of oil reserves in history, the U.S. strategic oil reserve has fallen to its lowest level in nearly 40 years. Therefore, it is difficult for the United States to continue to release strategic inventories on a large scale for a long time to stabilize oil prices.
geopolitics
Become an important force that dominates oil prices
The expectations and results of production cuts were quickly reflected in market prices, with international oil prices rebounding sharply from a nine-month low hit last week, with a range-bound gain of nearly 8%. Goldman Sachs recently raised its oil price forecast, raising its fourth-quarter Brent forecast by 10% to $110 a barrel.
Morgan Stanley raised its forecast for Brent crude oil in the first quarter of 2023 to $100 per barrel following OPEC+ announced production cuts; UBS also believes that the oil market is expected to tighten further, and Brent crude oil will be in the next few days. Quarterly tops $100/bbl; OPEC+ cuts are enough to significantly change the supply-demand balance next year, leaving the market in full swing in 2023, says Warren Patterson, head of commodity strategy at ING in Singapore into a shortage. The bank’s forecast for Brent crude oil at $97 a barrel next year clearly has room for upside. However, it is possible that the U.S. will further release its strategic oil reserves, although such a move may only have a limited impact.
The U.S. government has tried to dissuade OPEC+ from making deeper cuts, saying economic fundamentals do not support it. Over the past year, U.S. President Biden has been working to control domestic inflation, and gasoline prices have recently fallen significantly from the highs set in June, contributing to the recent peak in some inflation indicators. However, according to the American Automobile Association (AAA), the national average gasoline price has rebounded by more than 5% in the past two weeks, which is likely to damage the prospects of Democrats in the congressional midterm elections on November 8.
The White House issued a statement saying that U.S. President Biden was disappointed by the “short-sighted behavior” of the OPEC+ oil production cut decision. The U.S. Department of Energy will release 10 million barrels of strategic crude oil reserve SPR in November, and Biden will continue to consider future SPR plans as appropriate. According to the U.S. Energy Information Administration (EIA), the U.S. strategic crude oil reserve fell by 1.4 million barrels to 429.2 million barrels in the week ended September 30, the lowest level since the 1980s.
“If oil prices rise sharply, driven by massive production cuts, it might further anger the Biden administration,” Citi wrote in the report. The U.S. Senate Judiciary Committee passed the No Oil Production and Export Cartels Act (NOPEC) by a vote of 17 to 4 in May this year, revoking the protection of OPEC+ members and their national oil companies from lawsuits. Sovereign immunity. Once it finally becomes law, the U.S. attorney general will have the power to sue OPEC+ members in federal court for manipulating energy markets and might seek billions of dollars in damages.
The U.S. Congress has failed many times to pass NOPEC for more than 20 years, and Saudi Arabia has lobbied vigorously before each bill is voted on. For example, in 2019 Riyadh said that if the United States decides to pass the relevant bill, it will sell oil in currencies other than the dollar. Some analysts believe that the current situation may become more delicate. After the Senate Judiciary Committee has successfully passed the threshold, the bill only needs to be passed in the Senate and the House of Representatives and signed by the President of the United States to become a formal law. Decisions can be the trigger.
In addition, the upcoming winter consumption boom in the northern hemisphere and the energy crisis in Europe may also be potential drivers of oil prices. The European Union plans to impose an embargo on Russian crude in December, while the oil balance is likely to come under further pressure due to soaring gas prices and increased gas-to-oil demand. As things stand, the oil market might be very tight when winter hits.
Varga analyzed that geopolitical factors will become an important force leading oil prices next. Once the new round of Western sanctions takes full effect, Russia’s oil exports may decrease by more than 1 million barrels. This catalyst has not been digested by the market yet, and it is necessary to guard once morest the impact of the combined effect of OPEC+ and Russia’s production cuts on the supply side. Under the condition that the global economy does not deteriorate significantly, US$90 will become a new balance point for oil prices, and the price of Brent crude oil is expected to further challenge US$100 in the fourth quarter. Return to Sohu, see more
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