On Monday, June 8, Beijing time, the U.S. WTI crude oil and Brent crude oil prices in the day exceeded $40/ barrel and $43/ barrel respectively. Previously, since April 22, the international oil price has been in the upward cycle for six consecutive weeks, and WTI has increased by more than 200%.
OPEC+ cut production by a record 9.7 million barrels per day in May, a record that had been set until the end of June. However, on June 7, at the OPEC+ ministerial video conference, OPEC agreed to extend the measures to reduce production by 9.7 million barrels per day for one month until the end of July. At the same time, countries that fail to achieve a 100% reduction in production between May and June will need to compensate between July and September. As a result, oil prices have risen. From June 7, Saudi Arabia's official price of crude oil exports to various regions has been greatly increased. Saudi Aramco will increase the price of all grades of crude oil to Asia by $5.60- $7.30 per barrel in July. OPEC+ oil producing countries cut production for a record period of time, Saudi Arabia's crude oil export price increased, many factors pushed the crude oil price to above $40.
The supply of global oil market is decreasing, and the problem of storage capacity depletion is not a problem. According to data released by EIA, in the week of May 29, crude oil storage recorded a decrease of 2.077 million barrels, with a previous increase of 7.928 million barrels and an expected increase of 3.038 million barrels. In addition, the level of active drilling rigs in the United States continues to decline, last Friday (Baker Hughes) reported that in the week of June 7, the number of oil and gas drilling platforms in the United States fell by 17 again, to 284, a total decrease of 691 compared with the same period last year, which is also the lowest record this year. As a result, the data showed that the oil production in the United States fell again, with an average of 11.2 million barrels/ day in the week to May 29, down 1.9 million barrels/ day compared with the highest level in history, compared with the same period last year, down 200,000 barrels / day. This is the ninth consecutive week of decline in production. The decline in US crude oil production has also contributed to the rise in oil prices.
In addition to the positive supply side, the significant positive non-agricultural data of the United States in May ignited the market enthusiasm. Facts have proved that the demand side of crude oil is also improving. Although the current epidemic is not completely controlled, the pace of economic restart in the world has not stopped. Especially in Europe and the United States, the restrictions are gradually lifted, and the fuel demand is obviously picking up, which provides a strong support for oil prices. In addition, the latest data shows that China's crude oil import in May broke the historical record, and China's oil import in May increased by 15% compared with April, reaching 47.97 million tons. That's 11.34 million barrels a day, up 15% from April, the largest monthly import volume on record. China's strong economic recovery after the outbreak has also opened up some demand for the global oil market.
Although the oil price continues to rise, in addition to the improvement of the supply and demand side, it also does not exclude the factors of market speculation. Maybe WTI is at the threshold of $40, and will continue to be tested later. In addition, there are some worries about the rise of oil price. Although there are data indicating that the crude oil inventory in the United States has declined, the product oil has increased sharply. EIA data shows that in the recent week, the gasoline inventory in the United States has increased by 2.796 million barrels, with the previous value decreasing by 724,000 barrels, with the expected increase of 1 million barrels; the refined oil inventory has increased by 9.935 million barrels, with the previous value increasing by 5.495 million barrels, with the expected increase of 2.686 million barrels, which shows that the product oil inventory has increased sharply. The increase of oil storage is more than expected, which shows that the current demand is still not optimistic, which will also become a stumbling block for the further rise of oil prices. On the whole, oil prices may be more volatile in the near future, not excluding the possibility of short-term price correction.
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