Recently, international oil prices have been on the decline.
Since mid-April, oil prices have continued a volatile downward spiral, falling from above $80 a barrel to near $70. Despite occasional pullbacks, the impact of macro factors on investor sentiment continues to weigh on the market, with the overall downward trend in oil prices continuing.
Where will the oil supply and demand “balance” tilt under the dual conditions? Will oil prices rebound?
Oil prices fell in a row from mid-April to early May. China Merchants Futures crude oil analyst Jing An pointed out that this is mainly due to the market on the “Opec +” production reduction plan has been fully expected, after the impact gradually weakened, traders again pay attention to the macro and demand level, the market worries about the European and American interest rate increase led to recession, the weakening economy will eventually be transmitted to the terminal oil consumption, demand expectations, resulting in pressure on the oil price.
At present, global macro risks continue to ferment, the downward pressure on the economy is obvious. Take the United States as an example. On the one hand, the debt ceiling issue hangs in the balance and the potential default risk makes investors more concerned about the economic outlook. On the other hand, US consumer spending has slowed. The Commerce Department reported that US retail sales rose 0.4 per cent in April from the previous month, below expectations of 0.8 per cent. That added to investors’ worries, putting pressure on oil prices.
Risk catalysis, oil prices have more adjustment. The current macroeconomic picture is complicated. Does that mean oil prices will continue to fall?
In fact, despite the current macro negative factors, but given the oil market supply and demand outlook tightening, there are still many institutions believe that oil prices are expected to rise.
On the one hand, oil prices were supported by an estimated 6.48 million barrels per day (BPD) of crude exports from Saudi Arabia in May, down 1.1 million BPD from April, according to market researcher Kpler. News that Opec crude production fell 191,000 barrels a day in April from March was also positive for crude.
Meanwhile, the US Energy Information Administration, the International Energy Agency and Opec all raised their oil demand forecasts in their latest monthly reports. Oil prices are also buoyed by the upcoming June travel season in the northern Hemisphere and the Middle East’s upcoming summer fuel boom for power generation.
It is worth noting that as the world’s largest oil importer, China showed a strong recovery momentum during the May Day holiday, making many institutions optimistic about China’s crude oil demand. China’s crude oil purchases are expected to remain high in the coming months as domestic tourism rebounds and the country absorbs a lot of crude oil, said Han Zhengji, an analyst at Jinlianchuang Crude Oil Co. As a result, crude oil inventories around the world are showing signs of tightening. Global stocks are expected to run down even faster as Opec + implements new production cuts starting in May.
“Generally speaking, the demand side has the peak season and China’s recovery of the increment, but the supply side of the increment is offset by the ‘Opec +’ production cut, so the second half of the probability of the oil market is short of supply, the probability of the price center moving up is high.” An Jing said.
Chen Shuxian, an analyst at Soochow Securities, pointed out that on the one hand, the supply side is tight, and on the other hand, the demand side is growing. Therefore, the possibility of a sharp drop in oil prices is low, and oil prices may remain high until 2023.