For several months, the crude oil futures market has been under pressure as the epidemic crisis has depressed the demand for crude oil. When low oil prices have become the norm and the international epidemic prevention and control situation has not improved fundamentally, in order to improve the supply and demand situation of the crude oil market, Saudi Arabia has recently led Countries such as Kuwait and the UAE have decided to reduce oil production from June.
The Saudi Ministry of Energy announced on the 11th that on the basis of the existing production reduction agreement, it will additionally reduce production by 1 million barrels per day in June. At that time, the daily output of Saudi crude oil will be reduced to 7.492 million barrels. Up to an average of 8.492 million barrels per day. The lowest level in nearly 20 years.
Saudi Arabia also asked the state-owned Saudi Aramco to reduce production in May "with the consent of customers".
The Saudi Ministry of Energy stated that this additional production cut is to encourage other oil-producing countries in OPEC + to comply with production cut agreements or to actively expand production cuts to support the stability of the global oil market.
The UAE announced that it will cut an additional 100,000 barrels per day in June.
Kuwait will also voluntarily cut an additional 80,000 barrels per day in June.
Russia, according to foreign media, said Russia reduced condensate production from 11.25 million barrels per day in April to 9.45 million barrels between May 1 and 11.
Iraq is also working hard to deal with economic shocks. Currently, Iraq is considering drastically cutting the social welfare of millions of government workers. Previously, the Iraqi government ’s 2020 budget plan was based on oil prices at the level of $ 56 per barrel.
Kazakhstan also ordered large and medium-sized oilfield producers including Tengiz and Kashagan to cut oil production by about 22% between May and June.
Supply pressure diminishes, U.S. oil contract rebounds sharply in July
On Tuesday afternoon, the WTI crude oil July contract continued to expand, and the intraday increase was once extended to 5%, reported at 26.33 US dollars / barrel. Brent crude oil futures rose to 3% during the day, reported at 30.52 US dollars / barrel.
In addition, traders should probably pay more attention to the recent shift of US crude oil futures contracts for months. Since last week, the volume of WTI crude oil futures July contracts has exceeded that of June contracts. Starting from the principle of activity, WTI crude oil futures July contracts have become the main contract, and most liquidity providers have recently moved positions for monthly advances. July contract.
Although the reduction in production has brought a certain dawn to the oil market, the global epidemic is still continuing, and the outlook for the oil market is still unclear.
Views on the long and short oil prices are as follows:
Paula Rodriguez-Matthew, senior market analyst at Lustad Energy, believes that if oil demand recovers as expected and no new epidemic prevention and control measures are implemented, additional production cuts in Saudi Arabia and other three Middle Eastern countries may effectively prevent Global oil storage facilities are filled, allowing time for waiting for demand to pick up.
Goldman's energy strategist Damien Courvalin previously wrote in a report that crude oil fundamentals are expected to improve as crude oil supply is about to decrease rapidly and oil demand will gradually improve as countries gradually unblock. The great improvement has led to a recent slowdown in the growth rate of crude oil inventories, coupled with the emergence of innovative oil storage methods, the oil market seems to be able to withstand the test of storage capacity, so the market is expected to move towards balance.
Morgan Stanley predicts that the price of Brent crude oil will steadily rise to US $ 35 per barrel by the end of the year. The market is not expected to rebound immediately, but "the period of the most mismatch between supply and demand may have passed."
She Jianyue, assistant general manager of Yide Futures Co., Ltd., said that in addition to a certain alleviation of the fundamental contradiction between supply and demand, changes in the market participation structure also play a delicate role in the trend of oil prices. According to its introduction, due to the abnormal situation of the "negative oil price" of the previous WTI05 contract, in the subsequent contracts, the crude oil ETF and paper crude oil bulls withdrew in large quantities, and after the short position was closed, the oil price was pushed up.
Australia's Commonwealth Bank energy commodities analyst Vivek Dahl said that the most severe phase of the outbreak of crude oil demand may have passed, but if a second wave of outbreaks occurs, demand and oil prices will be hit again.
Although some investors believe that these production cuts are expected to reduce global stock pressures that are rapidly saturating, analysts point out that the market will not be balanced.
Austrian JBC Energy believes that the price of Brent oil briefly rose above US $ 31 per barrel after Saudi Arabia announced additional production cuts, and then took back most of the increase, indicating that market participants may still be skeptical about the timing and strength of the rebound in crude oil demand.
Dhar of the Commonwealth Bank of Australia said: "On the demand side, the worst may have passed. But if there is a second round of outbreaks, then the oil market demand and prices will be destroyed."
