U.S. WTI crude oil May futures closed down $0.25, or 0.42%, at $59.98 a barrel on Thursday (March 21). Brent Crude Oil May Futures closed down $0.64, or 0.93%, at $67.86 a barrel on Thursday. The strong rebound of the dollar after yesterday’s sharp fall has increased pressure on oil price recovery, and market expectations that Iran’s crude oil import exemption may be extended, which has also put some pressure on the positive impact of OPEC’s production cuts. WTI crude oil futures in the United States hit the lowest of 59.66 U.S. dollars per barrel, Brent crude oil futures prices hit the lowest of 67.69 U.S. dollars per barrel.
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Fundamental positive factors:
The U.S. Energy Information Agency (EIA) reported Wednesday (March 20) that U.S. crude oil stocks had fallen by 9.589 million barrels to 439.5 million barrels in the week ending March 15, the largest weekly decline since July 13, 2018 (36 weeks), with the market forecast increasing by 309,000 barrels. More data showed that Kuxin crude oil stocks in Oklahoma fell 468,000 barrels last week, falling for two consecutive weeks. U.S. refinery stocks fell by 4.127 million barrels, the biggest one-week decline since the week of December 21, 2018 (13 weeks), with a market forecast of 1.094 million barrels. U.S. gasoline inventories fell by 4.587 million barrels, down for five consecutive weeks, with a market forecast of 2.414 million barrels.
In a recent interview, Saudi Energy Minister Falkh said that the process of rebalancing the crude oil market is far from over and that there should be no oversupply in the crude oil market. At the same time, it pointed out that the oil market could not achieve balance in the first half of this year, but crude oil stocks are expected to decrease by May. It also said that crude oil will not be in an unguided state in the second half of 2019. This makes the market more confident that the reduction will be extended to the end of this year, thus providing effective support for oil prices. In addition, Falkh hinted that OPEC + could reduce production by more than 1.2 million barrels per day, pointing out that only one member country currently overfulfills the task of reducing production every month, namely Saudi Arabia itself, but he did not think that Saudi Arabia would always bear such a heavy responsibility alone. This seems to mean that countries such as Russia have to attach greater responsibility, and the Russian energy minister has responded positively to this, but said it is difficult to reduce production too early for the time being due to seasonal factors in winter.
Data released by Baker Hughes on Friday (March 15) showed that the number of active oil drilling wells in the United States had dropped by 1 to 833 in the week ending March 15, the fourth consecutive week of decline, the first time since May 2016, when it had declined for eight consecutive weeks. At present, the number of active oil drilling wells in the United States has reached the lowest level since April 2018, which was 800 in the same period last year. More data show that the total number of active oil and gas drillings in the United States fell by 1 to 1026 by the week ending March 15.
Fundamental bearish factors:
In the U.S. market, bulls suddenly launched a counter-offensive, the dollar index accelerated near 50 points to 96.63 in the short term, erasing the decline after the Federal Reserve resolution, out of the U-shaped reversal market. Some analysts believe that the trend of the dollar is similar to that of the euro after the last ECB meeting, and the market reaction may be overdone. As the dollar continued to rebound, Sterling plunged more than 100 points to 1.3003 in the short term.
Iran’s crude oil import exemption expires in May, and there is widespread expectation that President Trump will extend the exemption, even though he has been claiming plans to cut Iran’s crude oil exports to zero. Market analysts believe that if countries’import exemptions can be extended, it will inevitably weaken the positive impact of production cuts to a certain extent, thus limiting the rise in oil prices.
The U.S. Energy Information Agency (EIA) reported Wednesday (March 20) that domestic crude oil production increased by 100,000 barrels to 12.1 million barrels a day last week, returning to a record high as of March 15.
Uncertainties in the Sino-US trade negotiations still constrain the space for oil price rebound. Foreign media reported that the Sino-US Leaders’talks will not be held this month, but at the earliest, they will wait until early April. The talks are expected to reach a final trade agreement. In addition, signs of a global economic slowdown are increasing, fearing to drag down the performance of crude oil demand. According to data released by the National Bureau of Statistics, in January-February 2019, the value-added of industries above the scale increased by 5.3% year-on-year, which was lower than expected, while creating the slowest growth rate since the beginning of 2002. According to estimates, excluding the influence of Spring Festival factors increased by 6.1%. From a ring-to-ring perspective, in February, the value added of industries above scale increased by 0.43% over the previous month.
After the recent ECB policy meeting, President Draghi pointed out that the European economy was experiencing “a period of sustained weakness and general uncertainty”. In February, the growth of non-farm employment in the United States almost stagnated, with only a slight increase of 20,000. Analysts believe that the long closure of the government has a significant impact on this. Meanwhile, there are signs of slowdown in the economies of Europe, the United States and Asia, which makes the market worried about the performance of crude oil demand.