Since mid-April, oil prices have continued to fluctuate downward, falling from above US$80 per barrel to around US$70. Although there were occasional corrections during the period, the impact of macro factors on investor sentiment still put pressure on the market, and the overall downward trend of oil prices remained.
Where will the “balance” of crude oil supply and demand lean? Will oil prices rebound?
From mid-April to early May, oil prices fell continuously. An Jing, a crude oil analyst at China Merchants Futures, pointed out that this is mainly because the market has fully expected the “OPEC+” production reduction plan. After the bullish influence gradually weakened, traders paid attention to the macro and demand levels again. Weakness will eventually be transmitted to the final consumption of oil products, so the demand is expected to be lowered, which will suppress oil prices.
At present, global macro risks continue to ferment, and the downward pressure on the economy is obvious. Take the United States as an example. On the one hand, the issue of the U.S. debt ceiling remains unresolved, and the potential risk of default makes investors more worried about the economic outlook. On the other hand, U.S. consumer spending has slowed. The U.S. Commerce Department reported that U.S. retail sales rose 0.4% in April from the previous month, below expectations for a 0.8% increase. This further exacerbated investor anxiety, leading to pressure on oil prices.
Catalyzed by risks, oil prices have been adjusted more often. The current macroeconomic situation is complicated, does this mean that oil prices will continue to drop?
In fact, despite the current macro negative factors, many institutions still believe that oil prices are expected to rise in view of the tightening supply and demand prospects in the crude oil market.
On the one hand, data from market research firm Kpler shows that Saudi Arabia’s crude oil exports in May are expected to be about 6.48 million barrels per day, a decrease of 1.1 million barrels per day from April, supporting oil prices. The news that OPEC’s crude oil output fell by 191,000 barrels per day in April compared with March is also good for crude oil.
On the other hand, the US Energy Information Administration, the International Energy Agency and OPEC all raised their oil demand forecasts in their latest monthly reports. Right now, the peak travel season in the northern hemisphere is approaching in June, and the Middle East is about to enter the summer peak oil consumption for power generation, which also supports the rise in oil prices.
It is worth noting that, as the world’s largest oil importer, China showed a strong recovery momentum during the “May 1st” period, which made many institutions optimistic about China’s crude oil demand. Jinlianchuang crude oil analyst Han Zhengji believes that as domestic tourism rebounds, China absorbs a large amount of crude oil, and it is expected that China’s crude oil purchases will remain at a high level in the next few months. Affected by this, global crude oil inventories are showing signs of tightening. With “OPEC+” implementing new production cuts since May, global crude oil inventories are expected to be depleted at a faster rate.
“Overall, there is an increase in the peak season and China’s recovery on the demand side, while the increase in the supply side is offset by the ‘OPEC+’ production cuts. Therefore, there is a high probability that the oil market will be in short supply in the second half of the year, and the price center will move upward. The probability is higher. “An Jing said.
Soochow Securities analyst Chen Shuxian pointed out that on the one hand, the supply side is tight, and on the other hand, the demand side is growing. It can be judged from this that the possibility of a sharp drop in oil prices is small, and oil prices may continue to run at a high level in 2023.