Extreme cold weather has reduced supply, and oil prices have reached a one-year high.
First, the extremely cold weather has led to a decrease in supply, and oil prices have reached a one-year high.
In February, the average oil price rose by more than 10% compared with January, and the Japanese crude oil contract 07 once broke through the integer mark of 40,000. During the Spring Festival, crude oil production in the United States and Russia dropped sharply due to extremely cold weather. At the same time, the multinational Coalition forces headed by Saudi Arabia claimed to intercept a drone launched by the Houthi armed team allied with Iran, which was full of explosives. Extreme cold weather caused supply disruption and geopolitical events, which caused oil prices to rise unilaterally. However, after the large-scale cold wave weather, the reduced output will gradually recover. At the same time, OPEC+ sources said that in view of the rebound in oil prices, OPEC+oil producers may relax restrictions on crude oil supply after April. Near the weekend, oil prices retreated some of the gains.
As of Friday (February 19th), TOCOM Middle East oil futures Wenhua Financial Price Index opened at 37,940 yen at the beginning of the week and closed at 38,990 yen on Friday, up 1,080 yen, or 2.85%, from last week’s settlement price. The crude oil price index of culture, finance and economics is maintained in the range of 37810-40420 yen as a whole.
Second, this week’s US EIA data analysis
Inventory: As of the week of February 12, the inventory of commercial crude oil excluding strategic reserves decreased by 7.257 million barrels to 461.8 million barrels, a decrease of 1.5%, which recorded a decline for four consecutive weeks and fell to the lowest level since March last year. Gasoline inventories increased by 672,000 barrels, recording growth for four consecutive weeks. Refined oil inventories decreased by 3.422 million barrels, recording a decline for four consecutive weeks and hitting a new low since the week of November 20, 2020 (13 weeks). Cushing crude oil inventories decreased by 3.028 million barrels to the lowest level since March last year.
Import and export: As of the week of February 12, commercial crude oil excluding strategic reserves imported 5.898 million barrels per day last week, an increase of 41,000 barrels per day over the previous week. US crude oil exports increased by 1.245 million barrels per day to 3.862 million barrels per day last week. In the past week, the net import of crude oil inventories in the United States decreased by 1.204 million barrels per day.
Equipment utilization rate: As of the week of February 12th, the refinery equipment utilization rate increased by 0.1% to 83.1%, and it is expected to decrease by 0.2% to 82.8%. The utilization rate of refineries has risen to a new high since March last year.
Output: As of the week of February 12, the domestic crude oil output in the United States decreased by 200,000 barrels to 10.8 million barrels per day last week.
Third, other influencing factors
According to data released by Baker Hughes, an American oil service company, as of the week of February 19th, the total number of oil drilling wells decreased by one to 305, which was previously expected to increase to 309. The total number of natural gas drilling wells increased by 1 to 91 in the current week; The total number of wells drilled was the same as last week, with 397 wells.
The coldest weather in the past 30 years has caused serious damage to the major oil-producing States in the United States. The oil production has plummeted by more than 2 million per day, and these States had almost no need to deal with the Arctic storm. Consulting firm Energy Aspects Ltd estimated that as of Monday, the refining capacity in the United States had decreased by 3.1 million barrels per day. According to people familiar with the matter, Total’s refinery in Port Arthur, Texas, shut down the coking unit, with a capacity of 225,500 barrels per day. Total is also preparing to shut down the crude oil distillation unit of the refinery, which decomposes crude oil into hydrocarbon raw materials for all production equipment of the refinery. Due to severe cold weather in Texas, the largest oil refinery in North America was closed. According to an email from Motiva Enterprises LLC, the company will stop the operation of its refinery in Port Arthur, Texas. It is reported that the crude oil production in the Permian basin was frozen due to severe cold weather, and the crude oil production in the United States fell by more than 40% or 4 million barrels per day. Anadarko basin also has a large reduction in production.
According to people who know the production data, from February 1 to 15, the average daily output of crude oil and condensate oil in Russia was 1.38 million tons. This is equivalent to a daily output of 10.115 million barrels, which is about 44,000 barrels lower than the January level. Due to the extremely cold weather, some manufacturers cut off the flow of oil pipelines.
According to the Wall Street Journal (blog, Weibo), Saudi Arabia will increase its oil production when the oil price picks up, and plans to increase production in the next few months, so as to reverse the big reduction in January and increase production by as much as 1 million barrels a day. India’s oil minister also urged OPEC+to relax production cuts on Wednesday. It should be noted that the official position of Saudi Arabia is more cautious. Before the news from foreign media came out, the Saudi oil minister expressed the hope that the oil market would not be complacent and it was too early to announce the victory over the virus. It will not send a signal of OPEC+oil production reduction in the future. I hope that oil traders will not try to predict the trend of OPEC+.
The multinational Coalition forces headed by Saudi Arabia claimed to intercept a drone launched by the Houthi armed team allied with Iran, which was full of explosives. Prior to this, Houthi armed forces attacked an airport in the southern border area of Saudi Arabia.
CEO of Gazprom, a Russian gas company: Global oil demand has not recovered, but we have seen a positive trend. It is difficult for oil prices to stay above $60/barrel. Oil demand may return to the pre-crisis level next year. It is more appropriate to keep the oil price between 45-60 USD/barrel.
American officials said that the United States is willing to hold a dialogue with Iran at the six-nation meeting on the Iranian nuclear issue hosted by the European Union. For the first time in the United States, officials have loosened up.
According to the announcement by the Texas Electric Power Reliability Committee (ERCOT) that the local energy emergency has been cancelled, it is said that the local power grid has returned to normal. Many oil miners, including Marathon Oil Company, are taking advantage of the power grid and generators to restore power supply to resume production. The Texas oil field in the United States is slowly starting to restart drilling work. Previously, due to the southward movement of polar cold air, there was a historic drilling stoppage in the area involved in the oil field.
According to local media reports in Angola, Di Mantino Azevedo, Angola’s Minister of Mineral Resources and Petroleum, recently said in Luanda that Angola’s oil production only accounts for 20% of domestic daily consumption demand, while the rest of the oil consumption is imported from abroad. The minister said that Angola imported nearly 3 million tons of refined oil in 2019 and spent more than 1 billion US dollars. This import requires a lot of foreign exchange expenditure, which can be used for public investment and other expenditures in Angola. At present, in order to reverse this trend, the Angolan government has formulated a strategic plan for oil refining, which includes the construction of oil refineries in Cabinda, lobito and Soyo, and the modernization and optimization of Luanda oil refinery.
According to Iranian state television, Iranian Deputy Foreign Minister Rogochiy said in a television interview on the 21st local time that borrell, the European Union’s High Representative for Foreign Affairs and Security Policy, said that an informal meeting would be held to invite the Iranian nuclear deal participants and the United States. At present, Iran is considering and discussing the proposal with relevant parties, and will respond to it later. But at the same time, Rogochiy said that there is no need to discuss the return of the United States to the Iranian nuclear deal and fulfill its commitments. The only way is to lift the sanctions against Iraq, and some technical and implementation issues can be negotiated by borrell and others.
Fourth, the forecast of the market outlook
According to the latest news, the power grid in Texas has been restored and the oil industry is restarting production, which means that the fear of supply interruption caused by extremely cold weather will gradually disappear. The focus of the market will continue to shift to changes in the supply side. At present, the relationship between the United States and Iran is slowing down, and due to the rebound of oil prices, OPEC+ oil producers may relax restrictions on crude oil supply after April. Concerns about increased supply impose oil prices. Recently, oil prices have risen sharply, climbing to a one-year high. Oil prices are at risk of a short-term correction.
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