Market News OPEC+ is expected to stand firm, but crude oil bulls need to beware of unexpected risks
OPEC+ is expected to stand firm, but crude oil bulls need to beware of unexpected risks
Oil prices fell on Wednesday (November 3), on the one hand. Industry data shows that US crude oil and distillate inventories have increased significantly, and OPEC+ has increased pressure to increase supply. At the same time, concerns about the tightening of the Fed's policy will hinder economic growth intensified.
2021-11-03
9482
On Wednesday (November 3), US crude oil fell 2.5% after the American Petroleum Institute reported that as of the week of October 29, US crude oil supply increased by 3.6 million barrels, far exceeding market expectations. On the other hand, the United States continues to pressure OPEC+ to increase production more aggressively than the current plan. Analysts predict that if OPEC+ refuses to speed up the restoration of stopped supplies, the United States may use emergency oil reserves.
Vandana Hari, founder of energy consulting company Vanda Insights, said: "OPEC+ maintains the status quo to a large extent has been determined, but the market will pay attention to the unexpected."
The American Petroleum Institute (American Petroleum Institute) reported late on Tuesday that the U.S. crude oil supply increased by 3.6 million barrels as of the week of October 29. API also showed that gasoline inventories fell by 552,000 barrels, but distillate inventories rose slightly by 573,000 barrels. At the same time, crude oil inventories in Cushing, Oklahoma's crude oil transportation center, fell by 882,000 barrels this week.
Commerzbank analyst Carsten Fritsch said in a report that if the U.S. Energy Information Administration "also shows a similar increase in inventories, oil prices may fall further."
According to a survey of analysts conducted by S&P Global Platts, on average, EIA is expected to show an increase in crude oil inventories by 300,000 barrels. The survey also predicts that gasoline supply will be reduced by 900,000 barrels, and distillate supply will be reduced by 1.5 million barrels.
Despite the pressure from the United States and other importing countries, OPEC is expected to stick to its plan to increase production by 400,000 barrels per day at the meeting.
For OPEC+, part of the reason for the system to increase production is that the epidemic still poses risks. Saudi Arabia said last month that the crisis "is not necessarily over." Kuwait’s Oil Minister Mohammad Abdulatif al-Fares said on Monday that OPEC members support the current production plan, which has been able to ensure sufficient crude oil supply to balance the global market.
Iraq’s state-owned oil sales company SOMO also said on Saturday that the OPEC member states believe that the planned increase in production is sufficient to meet demand and stabilize the market. On Wednesday, Azerbaijan joined the ranks of OPEC+ members, which said that a moderate increase in production would be sufficient.
Broker PVM's Brunnock said: "Producing countries are expected to maintain a 400,000 barrels per month supply increase. This should maintain the supply deficit this quarter."
Biden's remarks sparked a speculation that if OPEC+ does not accelerate the pace of increasing production, the United States may cooperate with other countries to release crude oil from its strategic reserves. US National Security Adviser Jake Sullivan declined to say whether this option is being considered.
Commenting on the U.S. pressure, Carsten Fritsch, an analyst at Commerzbank AG, said: “Whether this will lead to a softening of OPEC+'s stance is still a question. Nevertheless, the debate about the release of strategic oil reserves is giving Oil prices bring pressure."
Crude oil prices may also be sensitive to the outcome of the Federal Reserve's interest rate decision. The market expects that the Fed will begin to reduce the scale of monthly bond purchases, and investors will pay close attention to whether policymakers will change their assessment of inflation, or whether Fed Chairman Powell will counterattack the expected rise in the market. The market expects that the Fed may start raising interest rates sooner than previously hinted.
Ole Hansen, Head of Commodity Research at Saxo Bank, said: “The market is uneasy before the FOMC meeting because the reduction in debt purchases and future interest rate hikes may harm economic growth. Crude oil and other commodities have been investors' hedge against inflation. If the Fed and other central banks become tough, this preference may be weakened."
The US Energy Information Administration's inventory data will be released later on Wednesday. British Petroleum (BP) said on Tuesday that it will increase its investment in the US onshore shale oil and gas business from US$1 billion this year to US$1.5 billion in 2022, indicating that high oil prices are encouraging other places to increase supply.
(U.S. crude oil futures daily chart)
At 21:47 on November 3, GMT+8, the US crude oil futures price was quoted at US$81.82 per barrel.
Vandana Hari, founder of energy consulting company Vanda Insights, said: "OPEC+ maintains the status quo to a large extent has been determined, but the market will pay attention to the unexpected."
API inventory surges, oil prices are under pressure
The American Petroleum Institute (American Petroleum Institute) reported late on Tuesday that the U.S. crude oil supply increased by 3.6 million barrels as of the week of October 29. API also showed that gasoline inventories fell by 552,000 barrels, but distillate inventories rose slightly by 573,000 barrels. At the same time, crude oil inventories in Cushing, Oklahoma's crude oil transportation center, fell by 882,000 barrels this week.
Commerzbank analyst Carsten Fritsch said in a report that if the U.S. Energy Information Administration "also shows a similar increase in inventories, oil prices may fall further."
According to a survey of analysts conducted by S&P Global Platts, on average, EIA is expected to show an increase in crude oil inventories by 300,000 barrels. The survey also predicts that gasoline supply will be reduced by 900,000 barrels, and distillate supply will be reduced by 1.5 million barrels.
Voices from many countries, OPEC+ expected to maintain the rhythm of increasing production
Despite the pressure from the United States and other importing countries, OPEC is expected to stick to its plan to increase production by 400,000 barrels per day at the meeting.
For OPEC+, part of the reason for the system to increase production is that the epidemic still poses risks. Saudi Arabia said last month that the crisis "is not necessarily over." Kuwait’s Oil Minister Mohammad Abdulatif al-Fares said on Monday that OPEC members support the current production plan, which has been able to ensure sufficient crude oil supply to balance the global market.
Iraq’s state-owned oil sales company SOMO also said on Saturday that the OPEC member states believe that the planned increase in production is sufficient to meet demand and stabilize the market. On Wednesday, Azerbaijan joined the ranks of OPEC+ members, which said that a moderate increase in production would be sufficient.
Broker PVM's Brunnock said: "Producing countries are expected to maintain a 400,000 barrels per month supply increase. This should maintain the supply deficit this quarter."
Controversy over U.S. release of strategic reserves puts pressure on oil prices
Biden's remarks sparked a speculation that if OPEC+ does not accelerate the pace of increasing production, the United States may cooperate with other countries to release crude oil from its strategic reserves. US National Security Adviser Jake Sullivan declined to say whether this option is being considered.
Commenting on the U.S. pressure, Carsten Fritsch, an analyst at Commerzbank AG, said: “Whether this will lead to a softening of OPEC+'s stance is still a question. Nevertheless, the debate about the release of strategic oil reserves is giving Oil prices bring pressure."
Investors continue to pay attention to Fed resolutions and EIA inventory
Crude oil prices may also be sensitive to the outcome of the Federal Reserve's interest rate decision. The market expects that the Fed will begin to reduce the scale of monthly bond purchases, and investors will pay close attention to whether policymakers will change their assessment of inflation, or whether Fed Chairman Powell will counterattack the expected rise in the market. The market expects that the Fed may start raising interest rates sooner than previously hinted.
Ole Hansen, Head of Commodity Research at Saxo Bank, said: “The market is uneasy before the FOMC meeting because the reduction in debt purchases and future interest rate hikes may harm economic growth. Crude oil and other commodities have been investors' hedge against inflation. If the Fed and other central banks become tough, this preference may be weakened."
The US Energy Information Administration's inventory data will be released later on Wednesday. British Petroleum (BP) said on Tuesday that it will increase its investment in the US onshore shale oil and gas business from US$1 billion this year to US$1.5 billion in 2022, indicating that high oil prices are encouraging other places to increase supply.
(U.S. crude oil futures daily chart)
At 21:47 on November 3, GMT+8, the US crude oil futures price was quoted at US$81.82 per barrel.
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