Crude oil trading reminder: big energy-consuming countries put pressure to solve energy shortages, focus on OPEC+ meeting

During the Asian session on Monday (November 1), U.S. oil fell slightly to $83.16 per barrel; oil prices rose by 11% in October, due to signs that consumption exceeded supply and led to a decline in inventories. The continued short supply of natural gas boosted oil prices. The demand for products also helped push oil prices higher in October; the OPEC+ meeting this week may influence the trend of oil prices.


In the day, we will focus on China's October Caixin Manufacturing PMI, the US October Markit Manufacturing PMI final value, and US President Biden's attendance at the United Nations Climate Conference.

Negative factors affecting oil prices

[The United States and major energy-consuming countries plan to put pressure on OPEC+]

A high-level US official told reporters in Rome that the US is discussing with other major energy-consuming countries how to urge the Organization of the Petroleum Exporting Countries (OPEC) + to increase production to solve the current energy shortage. The official said that leaders will also discuss how OPEC+, which has 23 member states, including Russia, can respond if they do not act. But he said he would not guess at random what options are available.



In addition, foreign media earlier quoted a number of diplomats and industry insiders to report, and is currently launching a drastic action to persuade OPEC+ to increase production. Saudi King Salman bin Abdulaziz Al Saud delivered a video at the G20 summit in Rome last Friday, saying that the government is seeking "balance" in the energy market.

According to the Saudi Press Agency, he said, “Saudi Arabia will continue to play a leading role in the economy, health, recovery from the global crisis, and finding a balance to achieve security and stability in the energy market.” OPEC+ will hold an online meeting on November 4 to evaluate policies.

[Iraq believes that an increase in oil production of 400,000 barrels per day is sufficient to meet demand]

Iraqi Oil Minister Ihsan Abdul Jabbar said that the 400,000 barrels per day increase in oil production is sufficient to meet demand. In a few days, representatives of some of the world's oil-producing countries will meet to discuss the level of oil production. The 23-member Organization of Petroleum Exporting Countries (OPEC)+ alliance led by Saudi Arabia and Russia is resuming production at a moderate rate of 400,000 barrels per day per month. During the meeting of ministers this week, it is expected that this increase will be approved again.

Jabbar said that rising natural gas and coal prices in Asia and Europe may lead to higher oil demand this winter. He said in a text message that an increase of 400,000 barrels per day per month will eventually help the oil market restore stability.

Ed Moya, senior market analyst at Oanda Corp., said that the gap in the oil market may be smaller than traders initially imagined, but it will not disappear soon. If OPEC+ continues to increase production gradually, crude oil prices may resume their upward momentum.

[The United States, Britain, France and Germany believe that it is still possible to restart the Iran nuclear agreement during the G20 summit]

US President Joe Biden and the leaders of Germany, France and the United Kingdom said that they still believe there is an opportunity to restart the agreement with Iran on its nuclear program, but Iran must change its course before easing sanctions.

The leaders of the above-mentioned countries issued a joint statement after meeting during the G20 summit in Rome, stating, “We firmly believe that it is still possible to quickly reach and implement an understanding on resuming full compliance, so as to ensure the long-term Iran’s nuclear program. Only for peaceful purposes, and to provide a lasting impact on Iran’s economic growth in sanctions relaxation," "Only if Iran changes its course can it be possible."

Leaders also said that Iran’s production of highly enriched uranium has also reduced the level of international supervision and coordination, which is “alert”. They called on the new Iranian President Leahy to seize the opportunity, but did not give a clear time frame. When asked when he hopes the talks will resume, Biden said that he "plans to restart the talks."

[U.S. Consumer Confidence Index Decline in October]
US consumer confidence fell in October compared with the previous month, and Americans’ expectations for inflation in the next year continued to rise. ? Data released last Friday showed that the final value of the University of Michigan Consumer Confidence Index fell from 72.8 in September to 71.7, and the value at the beginning of October was 71.4.



Richard Curtin, who is in charge of the investigation, said in a statement that “rising inflation and declining confidence in the government’s economic policies have offset the positive impact of rising income expectations and mitigation of the epidemic”.

Data shows that despite the recent decline in new coronavirus cases in many states, concerns about rising prices are still the primary consideration, suppressing consumer optimism. But even so, Curtin said consumers still "hope to start spending again during the holiday season." Consumers expect the inflation rate to rise to 4.8% in the next year, the highest level since 2008 and higher than 4.6% a month ago. They also expect the inflation rate to rise to 2.9% in the next five years, down from 3% in September. ?

According to a report from the University of Michigan, purchases of durable consumer goods such as home appliances and electronic products deteriorated in October from the previous month. The indicator fell to 85 in October, the lowest since 1980.

Bullish factors affecting oil prices

[OPEC+ alliance sharply lowers its forecast of oil supply gap]

OPEC+ alliance technical experts lowered their expectations for the supply gap in the global oil market this quarter. The representative of the organization revealed that the joint technical committee of the OPEC+ alliance concluded last Thursday that the global oil supply gap in the fourth quarter will be only an average of 300,000 barrels per day. Delegates said that this was far below the 1.1 million barrels per day shortfall originally submitted, and the committee revised its views based on the latest demand data.

The Organization of the Petroleum Exporting Countries and its partners met on November 4 to evaluate their plans to gradually restore production that was suspended during the epidemic. The revision of the supply and demand situation by the Joint Technical Committee may support Saudi Arabia's cautious stance. The country has rejected calls to speed up production. Although the rise in crude oil prices to a seven-year high prompted the White House to seek to increase supply, Saudi Arabia warned that demand remains vulnerable to the continued outbreak of the coronavirus.

Saudi Energy Minister and Prince Abdulaziz bin Salman said in an interview with Bloomberg TV on October 24, “We have not walked out of the downturn caused by the epidemic,” “When the crisis is contained but not necessarily over, people need to be careful and avoid taking it for granted. "The 23-member OPEC+ alliance jointly led by Saudi Arabia and Russia is recovering production at a moderate rate of 400,000 barrels per month. When the ministers hold an online meeting next week, they are expected to approve another 400,000 barrels increase in production.

Goldman Sachs said that the oil price bulls are still intact and reiterated the Brent crude oil target of US$90/barrel. It is estimated that the oil market deficit will remain at 2.5 million barrels/day. OPEC and shale oil drillers (increased) will respond very well to the supply. slow.

[S&P 500 Index Declines first, then rises, the market gets rid of the impact of the weak performance of technology giants]

The US stock market rose last Friday, and along with concerns about inflation and currency tightening, traders are evaluating disappointing company performance and bond market turmoil. The S&P 500 index opened lower, and the performance of Amazon and Apple put pressure on the index. The S&P 500 index rose by 6.9% in October, the largest monthly increase since November last year.

Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors, said, “As Halloween approaches, investors seem to be a little excited. After the announcement of Apple and Amazon’s results, most of us are prepared for today’s turmoil. Fortunately, The strong performance reports of companies such as ExxonMobil and Chevron have helped change market expectations."

In other respects, inflationary pressures and the prospect of interest rate hikes have triggered significant volatility in the U.S. bond market. The 10-year Treasury bond yield fell to 1.56%, and positive company performance helped support global stock markets. However, the supply chain chaos and inflation risks brought about by rising raw material prices are raising expectations for interest rate hikes and weakening the economic outlook.



Overall, affected by the global energy crisis, oil prices hit a seven-year high in October; but last week traders took profits and oil prices fell; the fundamentals of oil prices this week will be mainly affected by the OPEC+ meeting on November 4 , Traders continue to evaluate the possibility of OPEC+ to further increase production. In addition, the resumption of Iranian nuclear negotiations may drag oil prices in the short term.

At 8:18 GMT+8, US crude oil is currently quoted at US$83.13/barrel.