Oil supply demand will be in a loose cycle for a long time

Since the outbreak of novel coronavirus pneumonia, the international oil price has been rising the bottom of last April, driven by large-scale economic stimulus programs other factors. In terms of stages, oil prices reached the bottom of the market April to October last year, since November, oil prices have risen rapidly. In the late March this year, the oil price has been rising rapidly falling rapidly fluctuated. The improvement of supply demand fundamentals laid the foundation for the rebound of oil prices in this round. Financial factors have become an important driver of the rapid rise of oil prices, the epidemic control level is the key variable affecting oil prices.

Both sides of supply demand are also positive, providing support for the rebound of oil price bottoming. Since April last year, OPEC +, composed of the organization of oil exporting countries some oil producing countries such as Russia, reached implemented a large-scale production reduction agreement in history. The initial production reduction reached 9.7 million barrels per day, the market supply was greatly tightened; In addition, with countries gradually loosening the epidemic blockade measures, world oil demand bottomed back. The improvement of the basic level of market supply demand played an important role in the stabilization of oil price April to October last year.

In the optimistic expectation of supply demand, the trillions of dollars of economic stimulus other factors are the key factors that have caused the rise of oil prices since November last year. At the end of last year, the Multi Country epidemic repeatedly led to the recovery of oil demand. The sustained recovery of supply in non OPEC + producing countries led to the decline of market inventory removal rate, supply demand were basically limited in the support of oil prices. But the market optimistic expectation has effectively boosted oil prices. On the one hand, vaccine research development vaccination continue to promote, global economic recovery confidence has been strengthened, demand expectations are significantly improved; On the other hand, Saudi Arabia actively increased the reduction of production, the OPEC + "agreement on production reduction was well implemented, significantly improving supply expectations. Under the optimistic expectation of supply demand, combined with the US $1.9 trillion subsequent higher amount of economic stimulus plan, some financial institutions proposed that "crude oil is an excellent anti inflation asset". In March, the total positions of WTI Brent crude oil in the United States reached the highest level since may2018. Driven by this, oil prices reached a phased high of about $70 / barrel in early March.

The outbreak of European American emerging countries has been repeated, the supply side production pressure is superimposed. Since the middle of March, oil prices have declined adjusted, the fluctuation is intensified near us $60 / barrel. European vaccination progress is expected, a new wave of outbreaks, the recurrence of the blockade in various countries leads to the decline of oil consumption activity, which is a direct cause of the decline in oil prices. The supply side production increase trend gradually formed, data shows that the oil production in the United States is recovering, some shale oil companies are expected to expand their production capacity with financial support. Meanwhile, the OPEC + Ministerial Conference launched an increase in production agreement. Although the increase in production in the first half of the year was less than expected, it reflected a cautious trend of increasing supply, but the supply increase path has been clear. In addition, the blockage interruption of Suez canal have different influences on the international oil market, the oil price fluctuation is intensified.

Looking forward to the trend of oil price, it is expected to fluctuate at the current high level in the year, the medium long-term oil price will be strongly suppressed under the competition of renewable energy. With the increasing number of vaccinations the increase of the coverage rate in the later stage, the impact of epidemic situation is expected to be controlled in a large scale in the world. In addition, the United States will focus on promoting larger-scale infrastructure construction other economic stimulus plans. Global oil demand in the second half of the year is expected to maintain recovery trend, the basic orientation will support oil prices. Meanwhile, trillions of dollars of stimulus funds will provide strong support for capital market risk appetite, oil prices are expected to maintain high volatility in the year. In the medium long term, with the proposal of China's carbon peak carbon neutralization goals, more than 100 economies have proposed carbon neutralization goals in the world. The rapid growth of renewable energy will reduce the space for oil demand growth, in some economies, stock replacement will be gradually realized, the basic aspect of oil supply demand will be in a loose period for a long time. On the one hand, the rapid decline in renewable energy costs will effectively suppress oil prices, for example, photovoltaic power prices are expected to fall by more than half compared with the current ones in 2030; On the other hand, the buyer's dominant position in the oil market will gradually appear. In the future, international oil prices will gradually tend to be within the price range of renewable energy price line crude oil exploration development production cost line.

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Source: International Petroleum Network