OPEC unexpectedly releases a "surprise" oil price of 100 US dollars, the call is revived-Finance News
2021-09-15: [Original Article Link].
The aftermath of Hurricane Ida is still unsettled, and another hurricane "Nicholas" storm has resurrected, adding another fire to the recent strong oil price.
At the same time, OPEC also unexpectedly released a "surprise", raising crude oil demand expectations in the latest monthly report, although OPEC members resumed idle capacity, but the world will continue to face oil supply shortages in the coming months.
Under multiple positive assists such as hurricanes and OPEC, US oil broke through the $70 mark on September 13. WTI crude for October delivery on the New York Mercantile Exchange rose 73 cents, or nearly 1.1%, to close at $70.45 a barrel, the highest closing price since August 3. On the 14th, oil prices continued to rise slightly.
As the epidemic is still weighing on global demand for crude oil, analysts had earlier widely predicted that OPEC would release pessimistic expectations. However, OPEC has exceeded market expectations and continues to be optimistic about future crude oil demand in the monthly report.
In Sep 13th released the latest monthly report OPEC will 2021, over the course of the growth in oil demand forecast for 110,000 million barrels/day, at the same time 2022, of oil demand forecast sharply increased 980,000 barrels/day to 0.1008 billion million barrels/day, higher than the 2019, 0.1003 billion barrels/day in the level of demand, this also means that the next year the demand for crude oil will exceed the outbreak before.
"Global oil demand will exceed pre-epidemic levels next year as vaccination rates continue to rise and public confidence in the government's ability to manage the neo-Covid pandemic, thereby driving a recovery in travel." OPEC said in the monthly report.
In the short term, global demand for crude oil is slightly weaker. OPEC expected Delta strains short suppress demand for oil will 2021, in the fourth quarter of global oil demand forecast by 110,000 barrels/day to 99.7 million million barrels/day. However, on the whole, the market is still in short supply. Due to the interruption of production in other regions, the demand for OPEC crude oil is expected to increase.
In addition, since the hurricane Ida "to the US oil production to cause impacts to the OPEC will this year non-OPEC supply growth forecast of 200,000 B/d, at the same time, the expectation of supply growth in non-OPEC oil-producing countries will remain unchanged next year.
Overall, OPEC's forecast indicates that the oil market will become increasingly tight. After this year's highly contagious Delta virus dragged down the recovery, the recovery in oil demand is expected to be stronger than before, and the recovery is expected to occur mainly in 2022. "It is expected that in 2022, rising vaccination rates and a potential rise in public confidence in the government to control the Covid epidemic will become more common, which will further support the recovery in oil demand, especially transportation fuel."
Similar to OPEC, the International Energy Agency (IEA) also said in the latest monthly report released on the 14th that it is expected that the trend of shrinking oil market inventories this year will continue. The developed economies of the fuel stocks last month to reduce 30 million barrels now than they were five years lower than the average level of 0.186 billion million barrels, this month should reappear "shrunk dramatically".
In addition to the overall demand outlook, the reduction in supply caused by the hurricane is also a huge driver of the recent rise in oil prices.
In late August and early September, Hurricane Ida caused severe damage to oil production and refining facilities. According to the latest data released by the U. S. Security and Environmental Enforcement Agency (BSEE) on September 13, two weeks after Ida's invasion, it is estimated that 43.6% oil production capacity and 51.6% natural gas capacity in the Gulf of Mexico are still closed.
Jiasheng Group senior analyst Tony Sycamore told the 21st century economic report that Hurricane Ida landed two weeks later, nearly half of the US Gulf of Mexico oil output has not restarted. Hurricane Ida talked to America and the world crude oil supply and demand of net bullish influence is one-of-a-kind estimated Ada has resulted in the total stocks decreased by 30 million barrels ahead of the United States and 10 yue projected sales of 15 million barrels of strategic reserves of crude oil.
JPMorgan Chase also lamented, "In the past ten years of tropical cyclone activity, no one has caused so many Gulf of Mexico crude oil production to a standstill as long as this hurricane, bringing the crude oil market into an unprecedented situation."
Before the impact of Ida has yet to dissipate, Hurricane Nicholas once again set off a violent storm, becoming a new threat to interfere with oil production in the Gulf of Mexico. The National Hurricane Center (NHC) said on September 14 that Hurricane Nicholas had made landfall off the Texas coast.
The Gulf of Mexico oil companies are fully responding to the threat of hurricanes. Royal Dutch Shell, the world's second-largest oil company, has begun to withdraw staff from an oil platform in the Gulf of Mexico from the 13th, other companies are also preparing for hurricane-level winds from the second storm in the Gulf of Mexico in a few weeks.
Refiners are also bracing for a new round of hurricanes. Phillips 66 launched a hurricane response program at the refinery in Sweeney, Texas and the Lake Charles refinery in Louisiana; exxon Mobil is ready for bad weather at Baytown and Beaumont petrochemical plants in Texas.
"Concerns about US energy supplies remain hanging over the market after Hurricane Ida. People once mistakenly believed that the damage caused by the hurricane to the energy production infrastructure in the Gulf of Mexico could not take too long to repair. But the results will take a lot longer, and it may take a few weeks, especially when Hurricane Nicholas appeared in the Gulf of Mexico." Michael Hewson, chief market analyst at CMC Markets in the UK, lamented.
After a recent wave of rise, the market's confidence in the oil market has increased again, and the call for oil prices to rise to 100 US dollars has revived.
Bank of America, commodity strategist at Francisco Blanch said, if this year in the northern hemisphere winter than ever cooler, it is possible to make the global demand for oil to add 1 million to 2 million million barrels/day, the price of Brent crude rose to $100 a barrel in the first half of 2022.
At the same time Citi also expressed optimism: affected by the Hurricane Ida, United States Sep crude oil production may reach 30 million million barrels, 10 yue minus production will also be reached the figure of 5 million barrels a day. At a time when Ida caused a decline in US crude oil production, a demand recovery in East Asia is taking place, which may support crude oil prices in the fourth quarter.
Goldman Sachs also said in the latest report that after the fall, oil prices may rise sharply, especially if the Iran agreement breaks down. Delta virus has limited impact on global crude oil demand, and the recovery of US crude oil production continues to be lower than market expectations due to the impact of Hurricane Ida.
Another positive for oil prices is that shale oil is currently slower to resume production in the United States. Sycamore to the 21st Century Economic Report reporter said that the follow-up shale oil production pattern is worthy of attention. In 2020, the outbreak of the Covid epidemic, crude oil prices fell sharply, affecting a significant decline in shale oil production, with the continuous development of shale oil enterprise production technology, the balance of profit and loss in the main shale oil production areas at $21-42/barrel, oil prices are currently fully able to cover the costs of shale oil producers. However, subject to the slow recovery of capital expenditure of shale oil companies, the number of active rigs in the early stage of the new speed is flat, although the recent acceleration, but the United States crude oil production to return to pre-epidemic levels will still take a long time.
"The production motivation of shale oil companies has changed to some extent, and the limitation of capital expenditure is mainly due to investors' restrictions on the reinvestment rate of shale oil companies to promote stable free cash flow, shale oil companies are more focused on returning to shareholders than constantly drilling new wells." Sycamore explained.
The future increase in U.S. production is actually restricted by a series of factors, Sycamore told the 2 1st Century Business Herald reporter, "The amount of debt accumulated since the shale oil revolution is large, and the pressure to repay has hindered the expansion of capital expenditure, the cost of financing shale oil corporate bonds is also expected to increase as the Fed cuts back on bond purchases. Under the background of medium and long-term global carbon neutrality, international oil companies are gradually transforming to new energy sources, and independent listed shale oil companies are facing the problem of losing their investment attractiveness even if they maintain their current production behavior, biden's new energy policy will gradually become more difficult for companies to obtain mining licenses in the future, and many of the above factors will limit the expansion of capital expenditures of shale oil companies, which in turn will slow down the recovery of shale oil production."
From another perspective, when the overall mood of the oil market is optimistic, some analysts also remind investors to be alert to a series of potential risks. "The US summer driving season is gradually passing, and the US and China plan to release strategic oil reserves, coupled with Iran's possible resumption of oil exports, may increase (crude oil) supply." General manager of Nissan Securities research department Hiroyuki Kikukawa warning.
Note: This is auto-translated version of an article meant for Chinese audience. A mature and nuanced reading is suggested.