OPEC’s monthly report released on Monday once again lowered its forecast for global crude oil demand growth in 2022. This is the fifth time OPEC has lowered its oil demand forecast for this year this year. Affected by this, international crude oil prices fell significantly yesterday. At the same time, crude oil futures prices fell simultaneously within the market.
According to Yang An, head of the Energy and Chemical R&D Center of Haitong Futures, the main reason for the sharp decline in international oil prices is that authoritative institutions have recently continued to lower their expectations for the demand side of the crude oil market. Previously, the U.S. Energy Agency directly lowered its forecast for global crude oil demand growth in 2023 by 32% million barrels per day to 1.16 million barrels per day, which once poured cold water on the market. On the evening of the 14th, OPEC also lowered its forecast for world oil demand growth in 2022 to 2.55 million barrels per day, which further dampened market sentiment. Including signs of easing geopolitical factors between Russia and Ukraine, which also affected investor expectations, the crude oil sector became the weakest performing sector in the commodity market.
“Judging from the unilateral trend of the external crude oil market and the near-end monthly spread, the recent near-end monthly spread has been overall weaker, but there was an obvious rebound and then fell back on the unilateral side of the market. This shows that the trading logic of the unilateral side of the market is more Focusing on the changes in expectations, the early market rebound is the improvement in future supply and demand expectations of trading. The recent decline is naturally a revision of the improvement in future supply and demand expectations. The correction mainly comes from two aspects. One is the revision of expectations for marginal improvement in domestic and foreign macro conditions. , and the other is the revision of demand expectations due to OPEC lowering its crude oil demand outlook.” said Zhang Zhengze, analyst at Guohai Liangshi Futures.
Domestically, Yang An said that SC crude oil futures have also been affected by the exchange rate recently. As the US dollar has fallen from its high level, the RMB has appreciated sharply, making SC crude oil the weakest benchmark crude oil in recent times.
In fact, OPEC has lowered its demand forecast many times this year, lowering its demand forecast by more than 1 million barrels per day compared to the beginning of the year. In this regard, Dong Chao, senior analyst at Shenyin & Wanguo Futures, believes that there are three main reasons. First, the average oil price throughout the year is higher than expected, which has led to a decline in demand. The second is the damage caused to the global economy by successive sharp interest rate hikes, especially at the end of the interest rate hike period, when the superposition effect is the most serious, which will also have a greater impact on demand next year. Third, demand from China has also declined. The sum of the three is far greater than the substitution effect caused by the shortage of natural gas in Europe, leading OPEC to lower its demand expectations many times.
Yang An said that OPEC lowered its crude oil demand outlook later than the International Energy Agency and the U.S. Energy Agency. This may be because OPEC is usually more cautious in adjusting demand from the perspective of its interests as a seller, but with the global economy in the second half of this year Downward pressure is increasing, and OPEC has gradually and continuously lowered its forecast for crude oil demand.
In Zhang Zhengze’s view, the continued advancement of overseas interest rate hikes at the macro level is the main reason why OPEC has successively lowered its demand expectations. He said that although U.S. inflation data has dropped recently, the market believes that subsequent interest rate hikes will be around 100 basis points, with up to three more rate hikes, and the rate hike will be completed by March next year. However, this view may be too optimistic about the end point and time of interest rate hikes. Judging from the lead of housing prices over rents for more than one year, the extent of the weakening of the U.S. economy caused by such an intensity of interest rate hikes is still limited, so the high probability of interest rate hikes is a more long-term action. Against this background, as the U.S. manufacturing PMI begins to fall below the boom-bust line in the future, diesel demand, which is still resilient, will also weaken significantly.
Although OPEC has successively lowered its demand expectations, there are still international investment banking institutions such as Goldman Sachs who are firmly bullish on international oil prices. Jeff Currie, global head of commodities at Goldman Sachs, said Europe is not yet out of the energy crisis and oil prices are expected to soar by early next year.
Jeff Currie said in an interview with the media on Monday that as the EU’s ban on Russian oil comes into effect and Western countries are close to reaching a price ceiling for Russian oil, oil supply shortages may become a future problem. If Russia retaliates against the price cap, oil prices could be pushed higher. He added that other factors would exacerbate oil supply shortages, such as a slowdown in U.S. shale oil production and a halt in releasing oil from the U.S. Strategic Petroleum Reserve. The Biden administration has been using the Strategic Petroleum Reserve since May to curb high oil prices.
In Zhang Zhengze’s view, Goldman Sachs’ bullish view on oil prices is more correct based on supply-side logic. He said that under the background that OPEC+ has decided to cut production by 2 million barrels per day starting in November, and the actual production reduction has reached at least 1 million barrels per day, the international crude oil balance in the fourth quarter is at least a tight balance between supply and demand, which has led to OPEC+ The fiscal break-even point of major oil-producing countries at US$80/barrel remains supportive, and the basis for growth remains.
Dong Chao believes that the main logic of Goldman Sachs’s bullish view on crude oil lies in two points: the European energy crisis is not over and Russia may impose an embargo on countries that sanction it. “Regarding the first point, Europe’s winter natural gas reserves have reached the standard, and they have made up for this deficiency through various means. Moreover, due to clean energy regulations in Europe, its crude oil substitution effect is limited, at least until the end of this winter. Big changes. As for the issue of sanctions, the core issue is the specific price of European and American price limits for Russia. If the price is too low, it may lead to a certain loss of production. However, considering that Russian crude oil has accelerated its shift to the Asia-Pacific region, this part of the loss cannot be Will exceed��500,000 barrels per day, and Russian crude oil production could even increase if the price is right. Therefore, there is a high probability that oil prices will not rise to $115/barrel as Goldman Sachs said. “He said.
“There is currently little inventory pressure in the crude oil market, and supply-side tensions will continue for some time to come. This is the core driver for institutions to be bullish on oil prices.” Yang An said, however, at this stage, investors have continued to see weak demand data in the near future. Sentiment was low due to the shock, and oil prices performed weakly. Overall, it is an objective fact that supply will be tight in the next period after OPEC’s production cuts and the end of U.S. strategic crude oil launches. In this case, oil prices do not have the conditions to continue to fall sharply, but whether they can strengthen depends on the recovery of market confidence.
Regarding the market outlook, what are the main factors affecting international oil prices? Will there be a directional breakthrough in oil prices? In this regard, Dong Chao believes that the market needs to focus mainly on the pace of interest rate hikes by the Federal Reserve, the actual production reduction of OPEC, and the sanctions imposed by Europe and the United States on Russia. Oil prices will most likely still oscillate in a range.
Yang An believes that the current oil price is still in a relatively high price zone, which has a supporting effect on oil prices on the basis of OPEC’s production cuts. At the macro level, the negative impact on the market caused by the Fed’s interest rate hike has eased, but the downward pressure on the global economy is still huge and weak. Demand performance will limit the performance of oil prices. Without the risk of unexpected supply cuts, the upward drive of oil prices will be insufficient. Taken together, there is a high probability that oil prices will remain oscillating in a high range.
“Until the expectation of OPEC+ production cuts on the supply side and the demand side’s expectation of ‘collapse’ of diesel demand due to continued interest rate hikes cannot be falsified, oil prices will continue to maintain wide oscillations. At present, the demand side is more of a slow variable, with a range A breakthrough may still be caused by the falsification of supply-side expectations or other emergencies, such as subsequent OPEC+ production cuts that are less than expected and Russia’s response after European and American sanctions on Russian oil.” Zhang Zhengze said.
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