SunSirs: Favorable Stimulus Continued, Crude Oil Prices Rose significantly for Three Consecutive Trading Days

On February 3, the U.S. WTI crude oil futures market rose, with the settlement price of the main contract at $55.69/ barrel, up $0.93. Brent crude oil futures market prices also rose, the settlement price of the main contract at $58.46/ barrel, or $1.00. So far, oil prices have risen significantly for three consecutive trading days this week. According to the monitoring of SunSirs, WTI has risen by 6.68% and Brent by 6.10% in recent three days. On February 3, the settlement price of WTI reached the highest level in nearly a year.

On one hand, the extremely cold weather caused by the blizzard attack in the southeast of the United States led to a rapid rise in fuel heating demand. Moreover, recently, the organization of Petroleum Exporting Countries and its allies (OPEC+) have continued to effectively promote production reduction, which has brought a good supply side environment to oil prices. Moreover, the sharp decline in US commercial crude oil inventories in the past two weeks has become a direct driver to stimulate the rise of oil prices.

In the near future, SunSirs believes that oil prices are easy to rise but difficult to fall in the short term. At the macro level, after the US Biden administration takes office, it is urgent to launch large-scale stimulus measures, and the implementation may be accelerated later, which will bring direct and positive stimulus to the stock market and the oil market. The continuous promotion of vaccination also releases the expectation of rising demand. Although the epidemic trend has not yet been reversed, market confidence is still recovering slowly. The fundamentals of supply and demand also tend to be positive. At present, OPEC + production reduction policy continues to be effectively promoted. Iraq may compensate for production reduction in the later stage, and Libya's production will also decline, which will balance the risks of the supply side. Moreover, according to the current signs, it is difficult for the US and Iran to return to the "Iran nuclear agreement", and the short-term release of Iranian supply is not expected. However, the increase of shale oil production in the United States is still the main uncertain factor of crude oil supply in the future. Recent data show that the number of active drilling rigs for oil and natural gas in American energy companies has risen for ten consecutive weeks, and the increase of crude oil production in the United States is expected to increase significantly. However, the Biden administration will adopt a negative policy on traditional energy, and may achieve a certain degree of balance in the future. Overall, oil prices may remain high in the near future, and there is still the possibility of further exploration.

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