China Times (www.chinatimes.net.cn) reporter Ye Qing Beijing report
html On November 24, Foreign Ministry spokesman Zhao Lijian said that as one of the world's major oil producers and consumers, China has long attached great importance to the stability of the international oil market and is willing to maintain communication with relevant parties on maintaining market balance and long-term stability, strengthen cooperation, and jointly respond to challenges. At the same time, China has long been committed to ensuring the security of its own energy supply and has established an independent and complete national oil reserve system.China will arrange the release of national crude oil reserves according to its own actual situation and needs, as well as take other necessary measures to maintain market stability, and promptly publish relevant information.
On November 23, Beijing time, the US White House released a news report that US President Biden will work with other countries to release strategic oil reserves ; other countries include India, Japan and the United Kingdom. The United States will release 50 million barrels of strategic oil reserves (SPR). The market is currently focusing on the scale and time when these countries release oil reserves. In addition to releasing crude oil reserves, the recent resurgence of the new crown epidemic in Europe may slow down the global economic recovery. Meanwhile, investors are weighing the possibility of major economies releasing oil reserves. Just as global crude oil consumers announced the release of crude oil reserves, on November 23, after WTI crude oil futures briefly fell below $76 per barrel, on November 24, U.S. crude oil prices stopped falling and rose. As of 17:00, WTI crude oil futures temporarily closed at $78.93 per barrel.
The Ministry of Foreign Affairs said it is willing to communicate with all parties to release crude oil reserves
Regarding the United States' move to release crude oil reserves, Citibank analysts said that the total oil release volume of strategic reserves may be 100 million to 120 million barrels, or higher. Citi estimates, this includes the release of 45 million to 60 million barrels in the United States, 5 million barrels in India, and 10 million barrels in Japan and South Korea each.
Citi said that if oil is released in December this year and January next year, this may mean that the market will increase supply by about 1.5 million barrels to 2 million barrels per day. If no oil reserves are released, crude oil inventories are expected to decrease by 2.8 million barrels per day and 500,000 barrels per day in December 2021 and January 2022, respectively.
China will arrange the release of national crude oil reserves according to its own actual situation and needs, as well as take other necessary measures to maintain market stability, and promptly publish relevant information. Zhao Lijian pointed out that China has noticed that major consumer countries have taken recent actions to release reserves to cope with market volatility and changes. China is maintaining close communication with relevant parties, including oil consumer and producers, hoping to ensure the long-term and stable operation of the oil market through communication and collaboration.
As Japan and India successively publicly responded to Biden’s “joint release of crude oil reserves” proposed by Biden, representatives from OPEC+ also issued warnings, making the situation even more stalemate. It should be noted here that the background of the whole incident comes from the fact that after crude oil prices hit a new high in nearly seven years, the Biden administration, which faces severe domestic inflation pressure, is currently trying to convince other major crude oil consumers to release reserves and suppress oil prices.
This move is tantamount to the alliance of oil-producing countries that are happy to see oil prices "steadily rising", which is tantamount to fighting for control of the market. Previously, , White House also repeatedly asked OPEC+ to accelerate production increase, but they were all ignored by the organization. Helima Croft, chief commodity strategy analyst at RBC Capital Markets, said the joint stockpile move is equal to further increase the bets in the oil bet, potentially creating new pressure on the bilateral relationship between Washington and Riyadh and .
htmlOn November 23, the United States put pressure on OPEC to increase production and cool crude oil prices, which brought people to notice a relatively new problem facing the group of oil-producing countries: even if it wants to speed up production, it does not have much additional capacity. OPEC+ is lifting the record cuts set by the decline in demand in 2020, but it is not fast enough for the United States, which is concerned that oil prices are approaching a three-year high.OPEC+, including Russia, has been resisting pressure to accelerate production increases, insisting on a plan to gradually increase production by 400,000 barrels per day since August, saying it is worried that the accelerated production increase will lead to oversupply in 2022.But according to International Energy Agency (IEA), OPEC production in September and October was 700,000 barrels per day less than planned, which increased expectations that tight supply in the market and high oil prices would last longer.
The so-called strategic oil reserves are an important part of a national energy strategy. Unlike commercial crude oil supply/inventory circulating in the market, strategic oil reserves are managed by government departments, such as the US Department of Energy, which is managed by the US Department of Energy to buy time for energy consumption when short-term oil supply is impacted (massive reduction or interruption).
data shows that the US current strategic reserve crude oil inventory is 612.5 million barrels (as of October 29, 2021), accounting for 30%-34% of the total oil inventory in the United States; among which low-sulfur crude oil accounts for 41%, medium-high sulfur accounts for 59%, and is stored in four huge underground salt caves along the Gulf of Mexico respectively.
Forex futures trader Li Xin told the reporter of " China Times " that this move has become a powerful signal for consumer countries to unite to cope with rising international energy prices. If these countries release reserves, at least in the short term, it will lower oil prices, which can alleviate the further upward trend of inflation in .
Yide Futures analyst Chen Tong told the reporter of the China Times that, from the supply side, Saudi Arabia and OPEC+ oil-producing countries led by Russia insist on gradually increasing production according to the plan of 400,000 barrels per day. Faced with inflationary pressures brought by high oil prices, the United States is considering an announcement of an emergency release of crude oil from its strategic oil reserves. In the past two weeks, the U.S. Department of Energy has sold more than 6 million barrels of oil, part of a previously approved sale plan, a signal to urgently release reserves.
In addition, the United States has asked India, Japan and South Korea to coordinate the release of oil reserves. Iran nuclear negotiations will be restarted on November 29 in the capital of Austria, Vienna, . The market expects that if the negotiations on Iran nuclear agreement are going well, Iranian is expected to quickly restore crude oil exports of 2 million barrels per day. In the past three months, Iran's high-abundance enriched uranium inventory has increased by 77%. At the same time, the verification and supervision activities of the International Atomic Energy Agency have been severely restricted, and the key issues of returning to the Iran nuclear agreement are still difficult to solve.
The COVID-19 pandemic in Europe is severe
1 November 22, according to Bloomberg , German Chancellor Merkel said that the recent surge in infections in COVID-19 cases is worse than anything Germany has experienced so far, and she called for tightening restrictions to help control the spread of the virus. German Health Minister Spahn said that the epidemic situation in some areas of Germany is very, very serious, and it is not ruled out that any epidemic prevention measures are taken, including lockdown.
In order to cope with the spread of the new round of epidemic, on November 22, Austria "locked the city" nationwide and was not allowed to go out except to go to work, purchase daily necessities and exercise. Most shops, theaters, barber shops and Christmas markets are closed; restaurants and cafes are prohibited from dine-in; schools are not closed, but the government recommends that students attend classes at home. Earlier, the Austrian Prime Minister said that the lockdown will last for up to 20 days.
Industry insiders said that as Europe, especially Eastern Europe, strives to curb the spread of the new coronavirus, the possibility of similar lockdown measures is becoming increasingly greater. Europe's road and aviation fuel demand in November is expected to drop to 7.8 million bpd from 8.1 million bpd in October, although part of that is a normal decline this time of year. If Europe implements a new round of lockdown, oil prices will not be spared for the rest of the northern hemisphere's flu season.
In addition, from the demand side, Chen Tong told the reporter of the China Times that as more and more countries reopen their borders, strong gasoline consumption and increased international travel, global oil demand is increasing, but the increase in coronavirus cases in Europe, weakening industrial activities and rising oil prices will weaken demand to a certain extent. OPEC said it expects average oil demand in the fourth quarter of 2021 to be 99.49 million barrels per day, 330,000 barrels per day lower than the previous month's forecast.
Global manufacturing PMI fell slightly from 56 in May 2021 to 54.3 in October 2021. It can be seen that the global economy remains relatively strong in 2021. However, with the global credit cycle peaking and falling and the impact of the epidemic, it is expected that the global economy will continue to decline in 2022, and the outlook for crude oil demand is not optimistic.In terms of liquidity, the Federal Reserve's November interest rate meeting officially announced Taper, and will start to reduce the monthly bond purchase scale by US$15 billion later in November. If it is carried out at this pace, the QE will theoretically be officially ended in June 2022. Many emerging markets have begun to raise interest rates in , and some developed markets have also begun to prepare to tighten. After the Federal Reserve Taper, the turning point of global liquidity is not far away, and the market's risk appetite is facing a change.
comprehensively, Chen Tong said that the supply and demand gap in the oil market will narrow in the fourth quarter, and OPEC even expects that the oil market will begin to accumulate inventory in December. International institutions including the IEA are relatively consistent in the forecast of the supply and demand balance of the oil market in 2022. It is generally believed that as OPEC+ gradually withdraws from the production cut agreement, the production of the US shale oil will gradually increase, and the oil market will once again enter the accumulation stage. With the approaching marginal turning point of market supply and demand and macro liquidity, oil prices are unlikely to hit a new high in the fourth quarter, and are expected to fluctuate weakly. We mainly focus on OPEC+ production increase and the process of Iran nuclear negotiations, as well as the demand for oil and gas substitution brought by the cold winter weather.
Editor: Yan Hui Editor-in-chief: Xia Shencha
