China News Agency, Beijing, April 3rd Question: International oil prices ushered in a rebound after many countries announced plans to cut oil production?
China News Agency reporter Liu Wenwen
After repeated shocks to the banking industry in Europe and the United States and a sharp drop in oil prices, the international crude oil market ushered in a reversal.
On April 2, Saudi Arabia and several major oil-producing countries announced that from May to the end of this year, they will voluntarily cut oil production by an additional 1.6 million barrels per day. Boosted by the news of “joint production reduction”, international crude oil futures prices jumped at the opening of the Asian morning trading session on April 3. WTI crude oil (West Texas Intermediate crude oil) once stood above $80 per barrel, and Brent crude oil jumped to $80 per barrel. Barrel high of $85.
Will international oil prices usher in a big rebound this time?
Oil producers support oil prices
Affected by the continuous rise in interest rates in the US and European economies and the recent risks in the banking industry in the US and Europe, international oil prices continued to face downward pressure in the first quarter of this year. Data show that in the first quarter, U.S. oil fell 6.1%, while cloth oil fell 6.58%.
In order to boost the market, the oil producing countries have shown super high “consistency” in raising oil prices this time. Several members of the Organization of the Petroleum Exporting Countries (OPEC) have announced that they will cut oil supply starting in May. Specifically, Saudi Arabia will cut production by 500,000 barrels per day, Iraq will cut production by 211,000 barrels per day, Kuwait will cut production by 128,000 barrels per day, the United Arab Emirates will cut production by 144,000 barrels per day, and Kazakhstan will reduce production by 144,000 barrels per day. Algeria will reduce production by 78,000 barrels per day, Algeria will reduce production by 48,000 barrels per day, and Oman will reduce production by 40,000 barrels per day.
In addition, Russian Deputy Prime Minister Novak announced that the previously promised voluntary production cuts from March to June will continue until the end of the year. Due to the ongoing banking crisis in the United States and Europe, uncertainty in the global economy, and unpredictable and shortsighted energy policy decisions, the global oil market is currently going through a period of high volatility and unpredictability, Novak said.
International oil prices rise in response
As soon as the news of the “joint production reduction” came out, the price of crude oil rose accordingly, injecting a “boosting shot” into the recent sluggish market. Market institutions also quickly raised oil price forecasts. Goldman Sachs raised its forecast for Brent crude oil prices by the end of 2023 from $90 to $95, and by the end of 2024 from $97 to $100.
How do you view the voluntary production cuts announced by the Organization of the Petroleum Exporting Countries (OPEC) and the “OPEC+” composed of non-OPEC oil producing countries? Xi Jiarui, a crude oil analyst at Jinlianchuang, pointed out that on the one hand, the European and American banking crisis that broke out in early March caused crude oil prices to drop sharply and sharply in a short period of time, making the original “OPEC+” policy of reducing production and ensuring prices useless, so the increase large reduction in production.
On the other hand, for more than a year, international oil prices have remained high under the influence of geopolitics, making “OPEC+” more inclined to control crude oil production. “Driven by high profits, it is not surprising that oil-producing countries have increased production cuts again,” Xi Jiarui said.
Everbright Futures believes that the joint voluntary production reduction of oil-producing countries is another support for oil prices. It is expected that the balance of crude oil supply and demand in April will be greatly changed, from excess to tight balance, and oil prices have the basis for a sustained rebound.
Are oil prices more positive than negative?
Looking ahead, how will international oil prices develop? Xi Jiarui said that as of now, for the global crude oil market this year, there are obviously more positive factors than negative factors.
In terms of supply, the “OPEC+” initiative to increase production and cut production will inevitably further shrink the supply of crude oil, and the news of increasing production and reducing production will also greatly boost the psychology of the crude oil market. In terms of demand, as China optimizes and adjusts the epidemic prevention policy this year, the United States plans to announce the end of the epidemic in June. The resulting economic recovery and crude oil demand are expected to pick up, which will make the crude oil market show a pattern of short supply, thus Push up oil prices.
“If there are no other accidents, it can be said that the current crude oil price is at a low level this year, and there will be a lot of room for growth in the later period, and the possibility of hitting $90 per barrel cannot be ruled out.” Xi Jiarui said.
Yang An, an analyst at Haitong Futures, said that the decision to cut production has undoubtedly boosted market expectations. However, he reminded that the follow-up progress of European and American banking system risks and the adjustment of interest rate policies by the Federal Reserve and other macro-level risks are only temporarily alleviated and have not been completely eliminated. Generally speaking, investors still have great differences in the outlook for the oil price outlook, and it is not surprising that oil prices will still fluctuate sharply in the later period.