On Wednesday, domestic crude oil futures continued their strong rise from the previous day. As of the afternoon close, the main contract 2404 closed at 606.8 yuan, an increase of 1.47%, with a daily increase of 4457 lots.
Generally speaking, the strong performance of domestic crude oil is mainly affected by the tense international geopolitical situation and news that OPEC+ may extend production cuts. Sui Xiaoying, chief petrochemical researcher of Founder Mid-Term, said in an interview with a reporter from Futures Daily that on the one hand, the Palestinian-Israeli ceasefire agreement has not yet reached a final result, and the situation in the Red Sea remains high, which continues to increase the geopolitical premium of crude oil; on the other hand, there is news that OPEC+ may The extension of voluntary production cuts to the second quarter of this year or even the end of this year has further boosted the market’s bullish sentiment.
It is reported that in November last year, OPEC+ agreed to voluntarily reduce production by approximately 2.2 million barrels per day in the first quarter of this year, of which Saudi Arabia’s share of production reduction was 1 million barrels per day. Judging from the current global oil supply and demand balance sheet, Saudi Arabia’s voluntary production cuts will last until the end of the year to alleviate the oversupply situation. Therefore, Saudi Arabia is more likely to extend its production cuts. Further news on whether the production cuts will be extended is expected to be available in early March, so you can continue to pay attention.
While crude oil continued to rise in the domestic market, oil prices fell in the external market on Wednesday. On the news, data released by the American Petroleum Institute (API) on Tuesday showed that U.S. crude oil inventories increased by 8.43 million barrels in the week ended February 23, suppressing external oil prices.
As for why internal oil prices perform stronger, on the one hand, the theoretical cost of internal crude oil is rising due to the impact of Red Sea shipping disruptions on transportation costs; on the other hand, domestic refineries are expected to further increase their operating load, supported by cracking profits.
From the current perspective, the supply and demand side of crude oil continues to maintain a tight balance. On the supply side, OPEC+ members entered “voluntary” production cuts in the first quarter, with a total scale of 2.2 million barrels per day, of which Saudi Arabia and Russia reduced production by 1 million barrels per day and 500,000 barrels per day respectively. Russia cut production in January and basically fulfilled its commitment to cut production, but Saudi Arabia’s export levels increased to a certain extent from January to February. In addition, crude oil supply growth from Iran and Venezuela has slowed down. The market currently expects that OPEC+’s voluntary production cuts will be extended to the second quarter, which means that crude oil supply is expected to remain low. On the demand side, global oil demand is sluggish due to the impact of the economic environment and seasonal factors.
Overall, although the current performance of oil consumption is poor, the reduction in supply has offset the weakness in demand to a certain extent, keeping global oil inventories at a low level and providing certain support for oil price trends.
Since February, international oil prices have shown an overall oscillating upward trend. So in the future, what factors will continue to support the rise in oil prices? How will global crude oil demand evolve? What long-term impact will geopolitical factors, including the Red Sea shipping crisis, have on oil prices this year?
The subsequent focus of the crude oil market will still be on changes in the geopolitical situation and adjustments to OPEC+ production policies. Specifically, the current global geopolitical situation has not been effectively eased, and there has been no substantial progress in the Palestinian-Israeli ceasefire negotiations; at the same time, the situation in the Red Sea remains tense, and some oil tankers need to be detoured, which increases the oil supply cycle and freight costs; in addition, market expectations OPEC+ may continue its voluntary production cuts in the first quarter. With oil consumption still experiencing seasonal weakness, supply reductions will continue to support crude oil supply and demand fundamentals.
If OPEC+ extends its production cuts, it will still have a certain underpinning effect on international oil prices, and the current geopolitical situation continues to heat up. In addition, the minutes of the Federal Reserve meeting showed that the market generally believes that the possibility of cutting interest rates earlier than expected has increased, and multiple factors will give certain support to oil prices.
It is worth noting that market concerns about weak crude oil demand still exist, and institutions currently generally expect that the increase in global oil consumption this year will be lower than last year’s increase. , as transportation demand continues to recover and the risk of recession in developed economies such as Europe increases, it is expected that the increase in crude oil demand this year will still come from industrial demand in developing countries. The OPEC monthly report raised the global oil demand growth rate in 2024 by 40,000 barrels to 2.25 million barrels per day. The IEA monthly report maintained its forecast of global crude oil demand growth this year at 1.2 million barrels per day. The EIA monthly report lowered the forecast for global crude oil demand this year. Demand increased by 40,000 barrels to 1.42 million barrels per day. With the arrival of the spring maintenance season for European and American refineries, it is expected that global crude oil may experience certain accumulation pressure in the first quarter.
Regarding the impact of geopolitical factors on oil prices in the future, the current upward drive of oil prices by the current Palestinian-Israeli conflict and the Red Sea crisis has gradually weakened, but it still provides certain support for the widening of regional price differences caused by rising transportation costs.
The Palestinian-Israeli conflict and the Red Sea crisis have not had a substantial impact on global oil supply and demand for the time being. Looking forward to the market outlook, under the background that the current geopolitical situation has not been effectively alleviated, the trend of crude oil will continue to reflect the geopolitical premium. However, if the situation is reversed, such as the Palestinian-Israeli ceasefire agreement is reached, crude oil will also give back the geopolitical premium. However, it is expected that After a short period of adjustment, oil prices will gradually return to the dominance of supply and demand.
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