"Fear of heights" sentiment appears, how much space for the international oil price correction?

The expected release of Iranian production  the possible impact of high oil prices on the OPEC+ production cut path will increase the risk of marginal bearishness on the supply side. Bulls are becoming more cautious  the trend may gradually turn to a high-oscillation pattern. This week, despite the absence of a substantial OPEC+ agreement, the money game in the oil market has intensified significantly. In addition to selling through supply-side uncertainty, it may also be a reflection of rising volatility against the backdrop of high oil prices  limited upside.

Fundamental deluge expectations are clear but have been traded repeatedly

On the demand side, the recent high growth rate of terminal oil demand  its front-end indicators has been confirmed. With the effective control of the epidemic in major economies in Europe  the United States  the optimistic situation of the epidemic in India, the resonance of global travel intensity picked up in June  entered the traditional driving season. It is expected that gasoline consumption will hit a new high since the epidemic. High-frequency data tracking on flights shows that the number of airport security checkpoints in the US last week maintained the highest level since the outbreak, recovering to -25% in the same period of 2019. The number of commercial flights flying around the world hit a new post-outbreak high last week, recovering to -28% in the same period of 2019. With the recent implementation of cross-border convenience measures such as the European vaccine passport, Late European flight volume will usher in a significant growth, the recent active replenishment of aviation fuel in Europe  the United States has been reflected. In addition, the recent continuous strengthening of terminal demand has  supported the refining profit. Cracking spreads in major regions of the world are weak. The key lies in the rapid increase of refinery utilization rate, which to some extent also increases the worries about the sustainable growth of refinery crude oil demand in the later stage.

E

stimates of global oil supply  demand balance

On the supply side, the margin will be largely determined by the OPEC+ agreement to increase production  the pace of Iranian oil release, with near-term market attention focused on the OPEC+ disagreement over the past week. Late Thursday OPEC + joint ministerial committee once suggested in August to 12 months by 400000 barrels a day each month  the cuts expire time  April 2022 until December,  the point of all comments, countries, with no differences for the increase of 8 - December, but if the united Arab emirates to delay production agreement will be expected to adjust production benchmark, For this reason, OPEC+ failed to reach a consensus  eventually announced the cancellation of the ministerial meeting. Although OPEC statement did  mention the production quotas  production plan in August, but due to OPEC delegates said July August productivity will continue, so widely read as August does  increase, but the price high, plenty of spare capacity  production background, the motivation is revealed the differences of OPEC + obviously improved the supply of disordered release concerns.

Although the OPEC+ meeting appeared turbulences, but the funds on the OPEC+ behavior in the later period of the estimated bias is obviously cautious. The new OPEC+ production cycle started in 2017 continues to demonstrate the discipline  effectiveness of the organization's production constraints, with disagreements but ultimately resolved in accordance with the established policy framework. The current OPEC+ production reduction framework, agreed in April 2020, has been reduced  an initial baseline of 23 percent to 15 percent by July 2021, according to OPEC's monthly report released in early June. The market's Call on OPEC oil demand increased by 1.57 million b/d in the third quarter  730,000 b/d in the fourth quarter, respectively. In terms of total volume, the increase is roughly the same as the 2 million b/d increase  August to December. OPEC+ is committed to increasing production in line with demand at current oil prices. Rather than forming a gap to assist the expected guidance of the library is relatively clear. Although the August quota is still uncertain, but the current disagreement is on how much increase rather than whether to increase, it is only a matter of time to determine a gradual quota. Based on the static balance sheet, a sharp slowdown in inventory destocking in the second half of the year is already inevitable,  the expected release of Iranian production due to the Iran nuclear deal may continue to impact OPEC+ members' competition for share while increasing supply pressure.

Good intensive period has passed, inertia bullish need to be cautious

For the trading rhythm, the current  more attention to the change of supply  demand margin. Demand is clearly improving, but so far the pace of demand growth is more in line with the market's expectations at the beginning of the year as the global vaccine push is progressing well. In November 2020, the strong expected trading stage of oil price increased significantly. In May this year, the oil price entered the demand confirmation stage. Although the price remained strong, the increase slowed down somewhat.

Confirmation of strong demand in the face of OPEC+ production cuts at a high implementation rate,  the continued delay in the expected release of Iranian crude oil due to the somewhat difficult negotiations between the U.S.  Iran, were the main reasons for the supply  demand side to support oil prices in the second quarter. Talks between Iran  America recently shelved, Iran no longer extend temporary technical agreement with the international atomic energy agency  improve uranium abundance, for the timing of the agreement in anticipation of a lack of relatively consistent current  is in the third quarter to reach a relatively pessimistic point, in the late of the Iranian nuclear negotiations big probability embodied in marginal bearish on the surface of the message. On Monday night, OPEC+ canceled its meeting,  there is a possibility that it will  increase production in August.  a marginal volume perspective, no matter how OPEC+ plans to increase production in the later stage, it is likely that the oil price will be flat  higher than this expectation, which also led to the weakness of oil prices after a brief push up.

In summary, while we still expect the underlying data for the third quarter to confirm a marginal increase in oil demand  continued inventory depletion, inventory turning points do  necessarily correspond to price turning points in the historical cycle. At present, oil prices have entered the high range after the shale oil revolution  OPEC+ spare capacity is sufficient. Under the background of bright data on the demand side but  exceeding expectations,  potential risks on the supply side, high oscillation is more likely to be the model of oil price interpretation in the later period. This week's high volatility may have been a preview of supply risks. There is still room for a pullback in a market environment  fear of heights has emerged  positive surprises have been relatively sparse, but watch for the negative feedback effect of renewed support  OPEC+ members after a series of declines.

For more information about the energy trading platform, please consult Eurasia International Energy Trading Market Management (Jiangsu) Co., Ltd., a manufacturer of financial service platform, storage  logistics platform, hazardous chemicals trading license application platform  bulk energy trading platform.

Source: China Energy Network