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Market News Refinery shutdown drags U.S. oil to close more than 1% lower, OPEC+ meeting will be held soon

Refinery shutdown drags U.S. oil to close more than 1% lower, OPEC+ meeting will be held soon

U.S. oil futures fell 1.1% on August 31, and settled at US$68.5 per barrel. The cumulative decline in August was 7.5%, the largest monthly decline since October last year. After the weekend’s Hurricane Ida, analysts believe that the market is optimistic. The industry is expected to rebound sooner, leading to weaker crude oil prices; the OPEC+ meeting was held at 23:00 GMT+8 on Wednesday. Investors consider OPEC+ may maintain their production increase plans unchanged, and the market is relatively cautious.

2021-09-01
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On Tuesday (August 31), US oil futures fell 0.71 US dollars, or 1.1%, and settled at 68.5 US dollars per barrel; Bulk oil fell 0.42 US dollars, or 0.6%, to close at 72.99 US dollars per barrel. Although not far from the July high, the monthly lines of the two major contracts both fell for the first time since March. After being hit by Hurricane Ida over the weekend, analysts believe that the market is optimistic that the industry will rebound sooner, leading to weaker crude oil prices; the OPEC+ meeting was held at 23:00 GMT+8 on Wednesday, and investors considered OPEC+ might maintain its production increase plan. Changes, the market performance is relatively cautious.

When Hurricane Ida made landfall in the U.S. on Sunday, it was level four, causing at least 94% interruption of oil and gas production in the Gulf of Mexico offshore and causing "catastrophic" damage to the Louisiana power grid. It is expected that crude oil producers in the Gulf of Mexico will gradually resume production, and the resumption of refining and chemical projects is expected to be slower. Fears that the power outage and floods in Louisiana after Hurricane Ida will reduce the demand for crude oil from the refinery, and oil prices are under pressure.

Robert Yawger, head of the futures department of Mizuho Securities, said that the market is optimistic that the industry will rebound sooner, leading to weaker crude oil prices. I expect oil production to recover within a week, and oil refineries to recover within two weeks.

The OPEC+ alliance formed by the Organization of Petroleum Exporting Countries (OPEC) and its allies has agreed to increase the monthly supply by 400,000 barrels per day by the end of December. Sources previously stated that despite pressure from the United States to increase production, OPEC+ may maintain the plan unchanged. A document shows that the OPEC+ Joint Technical Committee (JTC) predicts that the oil market will maintain a supply shortage of 900,000 barrels per day this year, but as the alliance increases production, there will be an oversupply of 2.5 million barrels per day in 2022.

Bob Yawger, head of energy futures at Mizuho, said: “If the policy is changed in just one month, it will damage OPEC+’s credibility.”

The survey found that the Organization of the Petroleum Exporting Countries (OPEC) oil production rose to 26.93 million barrels per day in August, which is 210,000 barrels per day higher than the July figure and the highest level since April 2020. With the exception of February this year, OPEC production has increased every month since June 2020. However, involuntary production cuts have limited the growth rate. At present, major oil-producing countries are further relaxing supply restrictions in accordance with an agreement reached by OPEC and its allies.

An OPEC+ source said, "Considering the current oil price level and the possibility of an increase in oil demand, OPEC+ may stick to its previous decision. The OPEC+ agreement allows all member countries to increase their total production in August by 400,000 barrels per day, of which 25.3. Ten thousand barrels per day are allocated to 10 OPEC oil-producing countries that are bound by the agreement. Although the increase in output of these 10 member countries exceeds this quota, the overall monthly output increase of OPEC has not exceeded the quota. The oil production of OPEC members is still Below the level allowed by the latest agreement."

Earlier API data showed that as of the week of August 27, crude oil inventories decreased by 4.045 million barrels, gasoline inventories increased by 2.711 million barrels, refined oil inventories decreased by 1.961 million barrels, and Cushing crude oil inventories increased by 2.128 million barrels.

(4 hours chart of US Oil)
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