International crude oil futures rose on last Friday (January 20). The settlement price of the main contract of US WTI crude oil futures was 81.64 dollars/barrel, up 1.03 dollars or 1.3%. The settlement price of the main contract of Brent crude oil futures was 87.63 dollars/barrel, up US 1.47 dollars or 1.7%. After the oil price closed down on last Wednesday, it recorded a significant increase for two consecutive trading days, with Brent's cumulative increase of more than 3%.
China's demand outlook was optimistic, and the probability of "soft landing" of the US economy was increased
The main logical source of the oil market's upward trend was that China's demand outlook was affected by generally optimistic expectations. At the end of 2022, since China relaxed the epidemic restrictions, the economic growth prospects of China gradually strengthened, and the recovery of oil demand stimulated. Many institutions also had optimistic expectations about China's oil demand. The International Energy Agency (IEA) said on last Wednesday that China is expected to help global demand reach a record high in 2023. The previous day, the Organization of Petroleum Exporting Countries (OPEC) also predicted that China's demand will rebound. JPMorgan Chase raised its forecast for the growth of China's crude oil demand, believing that China's crude oil consumption is expected to reach a record high of 16 million barrels per day.
In addition, the market expects that the Federal Reserve's tightening policy will gradually come to an end. A survey predicts that the Federal Reserve will end its tightening cycle after raising interest rates by 25 basis points at the next two policy meetings, and may keep interest rates stable for the rest of this year. The US Federal Reserve's deputy governor, Bernard Siebrenard, also said on Thursday that the US economy would probably achieve a "soft landing". The improved economic outlook of the United States will also increase the market demand for crude oil.
The supply side pattern did not changed much
The OPEC and its allies (OPEC+) production restriction policy will continue until the end of 2023. At present, the daily production reduction of 2 million barrels is still implemented. The latest OPEC monthly report shows that OPEC's output increased in December, and its crude oil output increased by 91,000 barrels per day to 28.97 million barrels per day in December. The increment is not large, and the market has not responded too much.
In addition, Russia's oil exports did not fall sharply as expected, and the United States-dominated West limited Russia's oil exports by sea to a maximum of 60 dollars/barrel. However, Russia's oil exports did not fluctuate widely due to sanctions. Moreover, Ural crude oil has increased its discount, and oil exports have increased instead of falling. According to the data, Russia's export volume increased by 30%, or 876,000 barrels per day (to 3.8 million barrels per day), as of the week of January 13. The increase was mainly due to the increase in the traffic volume of Baltic ports. In addition, from Biden's current position, he is not inclined to continue to hold down the price of Russian oil through a two-month review, which becomes meaningless from the current discount strength of Ural crude oil.
US oil inventory data is mixed
The US crude oil and refined oil storage increased significantly, and the data made the market remain vigilant about the expected decline in fuel demand, thus limiting the rise of oil prices. According to the data released by the US Energy Information Administration (EIA) on Thursday, the US crude oil inventory increased by 8.48 million barrels to 454.2 million barrels as of the week of January 13, a fourth consecutive increase, with an expected decrease of 2.243 million barrels and an increase of 18.962 million barrels from the previous value; The gasoline inventory increased by 3.483 million barrels, with an expected increase of 2.529 million barrels, and the previous value increased by 4.114 million barrels. However, refined oil inventory decreased by 1.939 million barrels, recording the largest decline since the week of October 7, 2022. It is expected to decrease by 12.22 million barrels, and the previous value decreased by 1.069 million barrels. In addition, the US Strategic Petroleum Reserve (SPR) inventory last week fell to the lowest level since the week of December 2, 1983. At the same time, news said that the United States would gradually reduce the sales of strategic oil reserves, which to some extent diluted the negative sentiment of inventory reports and pushed up oil prices.
SunSirs crude oil analysts believe that the supply and demand structure of the oil market will remain stable in the short term. On the macro level, the fall of the US dollar will continue to support the oil price. At the same time, there is little pressure on the supply side, but the increase of Russian oil exports will dilute the expectation of tight supply. On the demand side, it needs to be seen dialectically. On the one hand, China's optimistic demand outlook will support oil prices, but the general background of the global economic recession has not been reversed, and the demand outlook may have some variables. In general, the crude oil market will maintain a strong trend in the near future.
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