OPEC lowers crude oil expectations

Since this year, international oil prices have experienced a huge drop. With the reduction of production in oil-producing countries and the restart of the economies of many countries, the price of crude oil fell first and then rose, and has basically recovered the “lost ground”. In its monthly crude oil market report released on the 12th, OPEC once again emphasized the "huge uncertainty" under the epidemic and slightly lowered its demand forecast for this year. According to the analysis, this means that the coordinated production cuts of oil-producing countries will continue in the future.

　　 Crude oil demand shrinks

　　 As the epidemic restricted tourism and economic activities, crude oil prices plummeted. Although some countries have eased blockades and demand has recovered, concerns about a new outbreak of the epidemic have suppressed crude oil prices. OPEC predicts that this situation will continue. World oil demand will drop sharply this year, and the prospects for recovery next year will face huge uncertainties.

OPEC stated in the report that world oil demand is expected to decrease by 9.06 million barrels per day this year, higher than the previous month’s expected reduction of 8.95 million barrels per day; oil demand is expected to remain at 7 million barrels per day in 2021, the same as before. , But uncertainty may have a negative impact on the future.

　　 "In the second half of 2020, the prices of crude oil and related products will continue to be affected by the second wave of infections and concerns about increased global inventories." OPEC stated in the report.

　　 On the demand side, the report shows that China’s crude oil imports hit a record high in June, slightly below 13 million barrels per day, and China’s net imports of petroleum products increased by 1.411 million barrels per day to 13.606 million barrels per day compared with the previous round of statistics. India’s net imports of petroleum products increased by 178,000 barrels/day to 3.235 million barrels/day compared with the previous round of statistics; the US’s net imports of petroleum products decreased by 959,000 barrels/day to 206,000 barrels/day compared with the previous round of statistics.

　　 OPEC also said that the decline in fuel demand is expected to exceed expectations, although US government data shows that inventories are falling, supporting the view that fuel demand is picking up. Earlier, the U.S. Energy Information Administration stated that U.S. crude oil, gasoline, and distillate inventories fell last week. As refineries increased production and improved demand, U.S. fuel demand increased to 19.37 million barrels per day, and crude oil production increased from 11 million barrels per day. It fell to 10.7 million barrels per day, causing inventories to fall by 4.5 million barrels, higher than the 2.9 million barrels expected by analysts. OPEC said that due to the sharp drop in demand, oil inventories have increased. In June, oil inventories in developed countries climbed, 291.2 million barrels higher than the five-year average.

　　 The expectations of large crude oil companies are also relatively pessimistic. Due to the sharp drop in fuel prices and demand due to the epidemic, the world's five largest oil companies (Exxon Mobil, BP, Shell, Chevron, Total) in the second quarter cut their asset value by nearly US$50 billion and significantly reduced them The output. Global fuel demand once dropped by more than 30%, and is still lower than the level before the epidemic. Several executives at the oil company said that the huge write-downs were made because they expected demand to remain impaired in the coming quarters.

　　 It is worth noting that the OPEC monthly report last month raised its crude oil demand growth forecast, but this month's monthly report lowered its demand growth forecast again. OPEC said that due to weak demand for road and aviation transportation fuel, crude oil product inventories may continue to rise, but gasoline, fuel oil and naphtha prices are expected to continue to receive some support from industries less affected by the epidemic, such as household heating and petrochemical industries. .

　　Production cuts decline

According to OPEC's statistics, in terms of crude oil supply, as Saudi Arabia and other Gulf member states ended their voluntary production cuts in June, OPEC's daily output in July was 23.17 million barrels, an increase of 980,000 barrels from the previous month, and production was cut in July. The implementation rate fell to 97%, lower than the previous month's over 100%.

In terms of crude oil production, data show that in July, Saudi Arabia increased its production significantly, with crude oil production reaching 8.406 million barrels per day, an increase of 866,000 barrels per day from the previous month; Kuwait’s crude oil production was 2.158 million barrels per day, an increase of 73,000 barrels per day from the previous month Angola’s crude oil production was 1.173 million barrels/day, a decrease of 51,000 barrels/day from the previous month; Iran’s crude oil production was 1.936 million barrels/day, a decrease of 11,000 barrels/day; Iraq’s crude oil production was 3.752 million barrels/day, an increase of 3.9 Ten thousand barrels per day.

　　 Since August 1st, the 9.7 million barrels/day of oil-producing countries previously agreed to reduce the scale of production to 7.7 million barrels/day, so the output of oil-producing countries will increase in August. According to reports, the Russian Ministry of Energy said that in the first two days of August, Russian oil production averaged 9.8 million barrels per day, up from 9.37 million barrels per day in July. The UAE and other countries have also announced plans to increase production.

　　 OPEC said that this year’s crude oil demand for the organization averaged 23.4 million barrels per day, down 400,000 barrels per day from previous estimates. This shows that OPEC oil-producing countries will adjust their production in August as planned, which will increase their output by nearly 1.8 million barrels per day, which will pose a greater challenge to the fragile supply and demand of crude oil and lead to an oversupply situation in the market.

　　 Recovery is full of uncertainty

　　 After the publication of OPEC’s monthly report, international crude oil prices fell slightly. Analysts said that the US economic stimulus plan is still stuck in a stalemate, which has also put pressure on crude oil prices.

　　 OPEC also finds it difficult to determine the prospects for next year. For example, reduced demand for air travel, more energy-efficient cars, and more competition from other fuels may all have a negative impact on oil consumption. "Almost all forecasters predict that jet fuel will be difficult to make up for the lost demand in 2021." OPEC said that gasoline demand will be under pressure to return to the level of 2019.

　　 Patterson, a strategist at the Netherlands International Group, said that the process of demand recovery in the second half of this year was much slower than market expectations. Some investors pointed out that the recovery of oil demand next year is full of uncertainty.

　　 However, the factors supporting crude oil prices also exist. Some analysts believe that the economic recovery is promoting the recovery of the energy market, the manufacturing industry is showing obvious signs of rebound, and the demand for crude oil is slowly picking up.

OPEC oil-producing countries tend to believe that OPEC and non-OPEC oil-producing countries need to continue to implement production reduction agreements, adjust production, and support market rebalancing on the supply side, and government-led stimulus measures also need to continue to promote economic recovery and support The demand side of the crude oil market.

　　 On August 7, a number of oil-producing countries in the Gulf region, including Saudi Arabia, Iraq, the UAE, Kuwait and Oman, held a joint meeting. Countries believe that the restart of the economy has shown signs of stabilizing demand in the international crude oil market, and at the same time emphasized the need to strictly implement the previously agreed crude oil production reduction agreement. Iraq stated that it will continue to perform its quota compensation obligations and cut crude oil production by an additional 400,000 barrels per day in August as compensation for overproduction during the past crude oil production reduction agreement. However, it remains to be seen whether countries such as Iraq can fulfill their promises.