On August 4th, domestic Shanghai SC crude oil futures opened at 612.0 yuan/barrel. As of press release, crude oil futures rose 2.86% to 622.9 yuan/barrel, reaching a high of 624.1 yuan/barrel during the session and a low of 612.0 yuan/barrel.
In the external market, US crude oil opened at $81.73 per barrel, up 0.39% so far, with the highest price at $82.04 and the lowest price at $81.66; Brent crude oil opened at $85.31 per barrel, up 0.35% so far, with the highest price at $85.60 and the lowest price at $85.21
Market News and Data
Russian Finance Minister: It is expected that oil and gas revenue will increase by 73.2 billion rubles in August.
According to official sources from the Saudi Ministry of Energy, Saudi Arabia will extend the voluntary production reduction agreement of 1 million barrels per day that began in July for another month, including September. After September, the production reduction measures may be “extended or deepened”.
Singapore Enterprise Development Authority (ESG): As of the week ending August 2, Singapore’s fuel oil inventory increased by 1.998 million barrels to a three-month high of 22.921 million barrels.
The number of initial claims for unemployment benefits in the United States for the week ending July 29th recorded 227000, in line with expectations.
Institutional perspective
Huatai Futures: Yesterday, it was reported that Saudi Arabia will voluntarily reduce production by 1 million barrels per day until after August. Currently, it is expected to extend it to at least September and further extension is not ruled out. Saudi Arabia’s statement of reducing production and ensuring prices slightly exceeds market expectations, providing positive support for oil prices. Currently, the market is paying attention to the decline in exports from Saudi Arabia, Kuwait, and Russia. Currently, the month on month decline has exceeded 1 million barrels per day, and the reduction in production to exports is gradually being realized, looking ahead, it is expected that the market will pay more attention to inventory depletion to verify the supply and demand gap of 2 million barrels per day in the third quarter
Overall, the crude oil market has shown a pattern of explosive demand both upstream and downstream, with supply continuing to be tight. The probability of a downward trend at least in August after Saudi Arabia announced another extension of production cut is low. Looking ahead to the second half of 2023, based on the downward pressure from the macro perspective, the shift in the center of gravity of oil prices in the medium to long term is a high probability event. The disagreement lies in whether oil prices may still experience their last rise in the coming year before the mid-term sharp decline. We believe that after multiple rounds of significant production cuts in OPEC+, the probability of a phased gap in crude oil supply in the third quarter is still high. Due to the long-term high price difference caused by core inflation and the potential recovery space of domestic demand in the second half of the year, there is still a possibility of an upward trend in oil prices in the July August range. In the worst-case scenario, at least a deep decline should not occur. In terms of predicting the unilateral price trend, if the third quarter meets our prediction, Brent and WTI still have the opportunity to rebound to around $80-85/barrel (achieved), and SC has the opportunity to rebound to 600 yuan/barrel (achieved); In the medium to long term downward cycle, Brent and WTI may fall below $65 per barrel within the year, and SC may once again test the support of $500 per barrel.
Email: oiltools14@welongpost.com
Grace Ma
Post time: Oct-16-2023
