International crude oil prices rose in a row to end the follow-up trend of long and short intertwined
After three consecutive weeks of gains, international crude oil prices returned to a downward trend this week, falling more than 2.5 per cent. Market analysts said that the main reason for the decline in oil prices is that concerns about soaring U.S. fuel inventories and a global economic slowdown have suppressed demand prospects, but the outlook for the market outlook is still bullish. The political turmoil in Venezuela and Russia's commitment to accelerate production cuts may lead to a tightening of crude oil supply., To provide support for the follow-up trend of international oil prices, so the follow-up trend of international crude oil is still unclear.
As of the close on January 28, the price of light crude oil futures for March delivery on the New York Mercantile Exchange fell 1.7 US dollars to close at 51.99 US dollars per barrel, a decrease of 3.17. London Brent crude for March delivery fell $1.71, or 2.77 per cent, to $59.93 a barrel.
Slower economic growth depresses crude oil demand outlook
The general slowdown in global economic growth has been a long-term factor that has curbed oil price gains this year. The IMF cut its forecast global growth rate for 2019 by 0.2 percentage points to 3.5 per cent and said that "the risk of a larger downside correction is rising". In its monthly report released last week, OPEC lowered the average global demand for OPEC oil in 2019 by about 900000 barrels per day, and the growth scale of non-OPEC supply is expected to be about 800000 barrels per day higher than the global demand growth. The OPEC report suggested that oil prices are under pressure from oversupply and a possible deterioration in demand. Against the backdrop of high uncertainty about global economic growth and weak refining margins, concerns about global oversupply and deteriorating oil demand have put pressure on oil prices.
Daily foreign exchange (DailyFX) senior currency strategist Spivak said in a research report, the crude oil market is now mainly focused on global growth concerns, a number of factors began to pressure oil prices. US manufacturing PMI data for January may add to market concerns. Concerns about the risks of trade between the United States and China, as well as slowing economic growth in Europe and more fragile emerging economies, have weakened confidence in the oil market.
U.S. crude oil production continues to soar
Since 2018, U.S. crude oil production has continued to maintain a steady and rapid growth momentum, and production records have been continuously refreshed. By the end of 2018, U.S. crude oil production had climbed to 11.7 million barrels per day, with shale oil contributing the vast majority of the incremental production, with shale oil in the Permian (Permian) Basin alone increasing by 730000 barrels per day in 2018. This growth momentum is expected to continue this year. Baker Hughes Energy Services said in its weekly report on January 25 that U.S. energy companies' production may rise further. As of January 25, U.S. energy companies added 10 rigs to 862. This is the first time that U.S. energy companies have increased the number of wells in 2019.
At present, the United States has surpassed Russia and Saudi Arabia to become the world's largest crude oil producer. According to the latest data recently released by the American Energy Information Association (EIA), as of January 18, despite refinery production cuts, U.S. gasoline inventories still jumped by 4.05 million barrels to a record high of 0.2596 billion barrels, rising for the eighth consecutive week; last week Crude oil inventories also increased significantly by 7.97 million barrels. Barclays Bank of the United Kingdom stated in a report that the record oil production in the United States may make up for the gap caused by the short-term interruption of oil supply in some countries caused by the possible implementation of sanctions by the United States, and put pressure on international crude oil prices. The bank lowered its average Brent crude oil price forecast for 2019 to $70 per barrel from $72 previously.
US sanctions against Venezuela escalate
Venezuelan opposition leader Guaido announced himself as interim president on January 23, winning the support of the United States and a number of Latin American governments, prompting the current President Maduro to break relations with the United States. US President Donald Trump says he will continue to use the full force of the US economy and diplomacy to promote the restoration of democracy in Venezuela and end the illegitimate government of Maduro. As Venezuela plunge further into political and economic turmoil, the United States has hinted at possible sanctions on Venezuelan crude oil exports.
On January 28, US Eastern Time, senior government officials such as Kudlow, Director of the National Economic Council, and National Security Advisor Bolton attended a press conference at the White House and announced that the United States would impose new economic sanctions on Venezuela. The U.S. Treasury Department said the sanctions will freeze all assets of Petroleos de Venezuela (PDVSA) under U.S. jurisdiction and prohibit U.S. citizens and companies from doing business with it. Bolton said at a press conference that the sanctions will freeze Venezuela's assets worth $7 billion and reduce the country's exports by $11 billion next year.
The confrontation between the United States and Venezuela has caused the market to worry about the imminent arrival of embargo sanctions similar to Iran, which has supported international crude oil prices. Although Venezuela's production has been shrinking since the outbreak of the financial crisis, it has stabilized and remained above 1 million barrels per day. Today's escalation of U.S. sanctions is likely to further expand Venezuela's oil production cuts. Royal Bank of Canada Europe said: "Venezuela's oil production will be reduced by another 300000 to 500000 barrels per day this year, and the escalation of punitive measures may expand the production reduction by hundreds of thousands of barrels."
Russia pledges to speed up production cuts
In addition to Venezuela's oil exports blocked, Russia's commitment to speed up the pace of production cuts has become another factor in the international oil market. "We are all committed to the December agreement. So far all the signs are good, and Russia has promised that they will accelerate the pace of production cuts," Saudi Energy Minister Falih said in an interview on Monday."
On December 7, 2018, OPEC members reached an agreement with several non-OPEC oil-producing countries, including Russia, to reduce production by a total of 1.2 million barrels per day from January 1 this year to curb the declining international crude oil market. However, the implementation effect of the production reduction agreement is not satisfactory. Faleh has previously criticized Russia for reducing production at a slower rate than expected. In January, Russia's crude oil production dropped by only more than 30000 barrels per day compared with the level of October last year. Russia has promised to reduce production by 230000 barrels per day in the first three months of 2019. The Russian side attributed this to the cold winter and geological conditions in Russia that prevented rapid production cuts.
At present, this situation has changed. Falih said that Russia is committed to fulfilling its commitment to reduce production. "They have encountered some problems, but just like last year, they will always catch up." The market will wait for Russia's recent production changes, expecting Russia's production cuts to support international crude oil prices. (From China Energy Network)