At the beginning of the Asian market on November 1 (Tuesday), U.S. oil trading was around $86.17 per barrel; as oil prices fell by more than 2% on Monday, U.S. production may increase, and the spread of the epidemic affects demand, Saudi Arabia may lower the price of crude oil to Asia in December , which also drags down oil prices.
negative factors affecting oil prices
[Focus on Feder resolution U.S. stocks closed lower]
U.S. stock market fell on Monday, major stock indexes fell to end a month's strong gain, and investors' focus once again turned to the Fed's policy meeting this week. It is widely expected that the Fed will raise interest rates by 275 basis points at the end of Wednesday's two-day policy meeting, but investors will look for any signals the Fed may consider slowing down interest rates in the future.
Hopes for the Fed to withdraw aggressive interest rate hikes have boosted stocks in recent weeks, with the S&P 500 index recording nearly 9% gains over the past two weeks. The Dow Jones recorded its biggest monthly percentage gain since January 1976 and its biggest October percentage gain since at least 1900. Comments by Fed officials after the policy decisions were released and labor market data later this week will help markets form expectations for the December meeting and beyond rate hikes. "It's almost a conclusion, for at least three weeks, the likelihood of a 75 basis point hike is almost 100%, and the possibility of a greater or lesser rate hike is very small, but everyone waiting for this boot to fall is worried that people will digest comments on what will happen on December 14 on Wednesday. My hope is a 25 basis point hike. The reality may be 50 basis points, and even so, it's a very positive signal for the market."
In October, the Dow Jones Industrial Average jumped 13.95%, the S&P 500 climbed 7.99%, and the Nasdaq index rose 3.9%. Large growth stocks such as Amazon and Google parent company Alphabet also fell, down 0.94% and 1.85% respectively, which have been under pressure in an environment of rising interest rates. Almost all of the 11 sectors of the S&P 500 fell, with the technology and communications services sectors performing the worst, with a drop of more than 1%. The energy sector was the only sector that rose before U.S. President 1 Biden spoke to oil companies late Monday.
Energy companies such as Chevron and ExxonMobil have made profits for the quarter, benefiting from soaring energy prices, in stark contrast to the large tech companies that have largely disappointed investors. Eric Diton, president and managing director of TheWealth Alliance, said: " dividend shares, energy, industrial stocks, these stocks performed well."
According to Refinitiv data, so far, about half of the S&P 500 component companies have announced quarterly results, with third-quarter earnings growth expected at 4%, slightly lower than last week's forecast of 4.1%.
[Saudi Arabia may lower the price of crude oil shipped to Asia in December]
According to sources, Saudi Arabia may lower the price of most grade crude oil exported to Asia in December, as demand in the region weakens. Surveys show that Saudi Aramco may reduce the official price of its flagship Arab light crude oil by about 30-40 cents per barrel in December.
Saudi Arabia sets price trends for most Middle East oil exporters, usually publishing prices for the next month around the fifth day of each month, affecting 9 million barrels per day of crude oil shipped to Asia. DubaiChanges in the market structure of crude oil usually provide guidance on the price setting of Arab light crude oil. In crude oil futures trading in October, the price difference between Dubai crude oil delivered one month later and Dubai crude oil delivered three months later narrowed by 59 cents per barrel compared with September. The shrinking spot premium indicates a decline in demand for crude oil. In addition, the average refining margin (DUB-SIN-REF) of Asian refiners processing Dubai crude oil has dropped to $2.59 a barrel so far in October. However, sources said that the cut in the official selling price of Middle East crude oil may be moderate given the tightening market supply.
[Russia's first batch of crude oil exports in five months]
A ship loaded with Russian Sokol crude oil set sail from the Sakhalin-1 project in the Russian Far East, the first export activity of the former ExxonMobil (XOM.US) project in five months.
According to ship tracking data, Aframax tanker Vladimir Arsenyev left Russia's De-Kastri Pier on October 30 and made South Korea the destination. The ship is expected to arrive in Lishui on November 3, and the cargo is unloaded on another tanker or transported to Lishui Port through the so-called ship-to-ship transfer. The ship is owned by Russia's Sovcomflot PJSC, and the Aframax tanker usually has oil loading capacity of 650,000 to 750,000 barrels.
Previously, Russia unilaterally terminated ExxonMobil's rights in Sakhalin No. 1 and transferred the project to a Russian operator. The U.S. oil giant has been gradually reducing production since May this year. Traders monitoring the Russian crude oil market said it was unclear whether Sokol crude had been sold or who could be a potential buyer of these oils. State-owned Russian oil company recently provided Sokol crude in a non-public tender last week, with Sakhalin One producing about 227,000 barrels per day last year. Russia's diesel exported from Far East , namely Sokol, ESPO and Sakhalin; Blend and other diesels, are popular among North Asia buyers due to their close distance and high diesel production. Most ESPOs shipped from Kozmino port are usually sold to China, but India has also developed interest in the goods in recent months after OPEC+ oil-producing countries discounted supply.
Popular factors affecting oil prices
[OPEC Increases Medium- and Long-term Oil Demand Estimate]
Organization of Petroleum Exporting Countries (OPEC) released its annual outlook report, improving the medium- and long-term world oil demand forecast, and stated that despite an energy transformation, US$12.1 trillion of investment is still needed to meet oil demand. The report said that world oil demand will reach 103 million barrels per day in 2023, an increase of 2.7 million barrels per day from 2022 and 1.4 million barrels per day higher than last year's estimate. OPEC also raised its mid-term demand forecast to 2027, saying by the end of this period, demand will increase by nearly 2 million barrels per day from last year's forecast.
[OPEC+ plans to cut oil production by 2 million barrels from November]
As OPEC+ is expected to significantly reduce oil production to tighten market supply, oil prices have ushered in monthly increases for the first time since May.
U.S. crude oil futures price rose to more than $88 per barrel, up about 11% in October, the biggest increase since January. The Organization of Petroleum Exporting Countries (OPEC+) and its allies plan to cut production by 2 million barrels per day from November, the largest reduction in production since the global epidemic. The price spread at critical times has been in a sharp premium state, indicating that the market tension has further increased.
OPEC+ announced production cuts are the beginning of a period of uncertain global oil supply entering the winter, and EU will also impose formal sanctions on Russia's oil supply in December. Crude oil prices have fallen by a quarter since June as concerns about a slowdown in the global economy and tightening monetary policy could curb demand.
Managing Director of Vanir Global Markets Pte in Singapore said: "With the EU sanctions order against Russia will take effect on December 5 and the OPEC+ plan to cut production by 2 million barrels per day begins, oil market prices are expected to continue to rise."
This week, and the upcoming interest rate trend of central banks, including the Federal Reserve, has attracted much attention from the market. Even as the Fed continues to raise interest rates to curb inflation, the dollar rate has fallen from its recent record levels. As the US dollar weakens slightly, this will lead to higher crude oil prices.
Indian oil Minister on Monday urged the OPEC+ coalition of oil-producing countries to consider the impact their upcoming decision on December 4 will have on consumers as inflation rates are soaring around the world.
HardeepSinghPuri in the gap between a major industry activity in Abu Dhabi told Reuters that the OPEC+ decision was a “independent” decision.It is entirely up to the oil-producing countries to decide how much they want to produce and what price they want to sell, but he added: "They have to consider what is going on in the world and what impact their decisions will have."
[Oil prices are expected to gain limited gains]
Foreign media survey showed on Monday that for the rest of the year and in the early 2023, crude oil prices will be supported by OPEC+ production cuts and sanctions against Russia, but the recession may limit further gains.
A survey of 42 economists and analysts shows that the estimated average price of indicator Brent crude oil is $101.10 per barrel this year, and $95.74 in 2023, up from the September forecast of $100.45 and $93.70 respectively.
U.S. crude oil price forecasts slightly increased to $96.23 per barrel in 2022 and $90.39 next year, with forecasts last month being $95.73 and $88.70 respectively.
However, by quarter, Brent crude oil price forecast shows a gradual downward trend next year, with a forecast of $98.01 in the first quarter next year, $96.38 per barrel in the second quarter, and a further drop to $94.70 in the third quarter. Giovanni Staunovo, an analyst at UBS , said that inadequate investment, European ban on Russian oil, OPEC+ production cuts, and strategic sales of national inventory in the Organization for Economic Cooperation and Development (OECD) will keep the crude oil market tight and prices higher.
Some respondents said Russia may be able to maintain oil export flows to a large extent, but it is still expected that some of Russia's oil will exit the market due to EU sanctions.
[U.S. President Biden said he would plan to impose punitive taxes on energy companies]
On October 31, local time, US President Biden delivered a speech on White House on matters such as making high profits from oil companies, proposing the possibility of additional taxes on energy companies. Biden said that in the context of the global energy crisis, not only did American oil companies not cooperated with price cuts to alleviate the consumption pressure of the people, but instead took this opportunity to make record profits, which is unacceptable.
Overall, oil prices may be boosted by OPEC+ production cuts in the rest of this year, but this week, the US dollar strengthened and suppressed oil prices due to the Federal Reserve's interest rate hike in , and Saudi Arabia will lower the price of crude oil shipped to Asia. In addition, Russia's first batch of crude oil exports in five months, oil prices may be restricted in the short-term hiatus. Pay attention to API data during the day.
This article is from Huitong.com
