Why international oil prices continue to hit new highs

Yun Shang Hui Xin Limited

After several months of calm, international oil prices have recently ushered in a new wave of strong rises.

Data from Yingwei Finance shows that since August 24, the prices of WTI crude oil futures and Brent crude oil futures have continued to fluctuate upward. On September 1, WTI crude oil futures and Brent crude oil futures prices both hit new highs this year, with the main prices closing at US$85.55/barrel and US$88.55/barrel respectively. On September 5, the price of Brent crude oil futures exceeded US$90/barrel, and the closing price reached US$90.04/barrel. On September 14, the closing price of WTI crude oil futures exceeded US$90/barrel, reaching US$90.16/barrel, and the closing price of Brent crude oil futures was US$93.7/barrel, an increase of 14.28% and 14.28% respectively compared with the closing price on August 23. 12.6%.

Why are international oil prices rising strongly? What will be the trend?

Multiple factors push up oil prices

In fact, the recent rise in international oil prices is related to multiple factors.

Yang An, head of energy research at Haitong Futures, analyzed that “the core factor driving the sharp rise in oil prices is that against the backdrop of a sharp drop in inventories, the market expects that Saudi Arabia and other countries will not relax supply-side production reduction measures, and the market is once again concerned about tight supply. At the same time, in the near future, At the macro level, the pressure on the United States to raise interest rates has eased, and China's continuous rollout of proactive economic policies have also boosted market expectations. Many factors have combined to push oil prices up strongly."

It is worth noting that on the evening of September 5, Saudi Arabia announced a voluntary extension of its production reduction plan, extending the 1 million barrels per day oil production reduction measure for three months to the end of the year. It is understood that since May this year, Saudi Arabia has voluntarily reduced crude oil production by 500,000 barrels per day, and since July it has voluntarily reduced crude oil production by an additional 1 million barrels per day. After two production cuts, Saudi Arabia's average daily crude oil production has dropped to 9 million barrels, the lowest level in several years. In addition, Russia recently announced that it would extend its export reduction of 300,000 barrels per day until the end of December.

"Since late August, international oil prices have once again shown a continuous upward trend. On the one hand, after U.S. shale oil gradually changed from elastic production capacity to inelastic production capacity, the potential for increasing production has weakened, and 'OPEC+' has further strengthened its determination to reduce production and support prices. Recently, Saudi Arabia China and Russia once again simultaneously announced the extension of 1 million barrels/day of excess voluntary production cuts and the policy of reducing exports by 300,000 barrels/day. This did not appear to be the gradual withdrawal of production cuts that the market had expected; on the other hand, China has recently introduced a series of policies targeting the real estate market. Stimulus policies will further strengthen the destocking logic of the crude oil market in the second half of the year. The combination of these factors has led to stronger fluctuations in international oil prices." Gao Mingyu, chief energy analyst at SDIC Essence Futures, said in an interview with a reporter from China Energy News.

Domestic refined oil prices will rise

The rise in international oil prices has also caused changes in the prices of refined oil products in my country.

On September 6, the National Development and Reform Commission issued the latest round of refined oil price adjustment announcement, saying that since the adjustment of domestic refined oil prices on August 23, 2023, oil prices in the international market have fluctuated. Calculated according to the current domestic refined oil price mechanism, on September 6 Compared with the average price of the first 10 working days on August 23, the price adjustment amount is less than 50 yuan per ton. According to the relevant provisions of the "Measures for the Administration of Petroleum Prices", there will be no adjustment to the prices of gasoline and diesel this time.

According to a reporter from China Energy News, the average international oil price in the first 10 working days corresponding to the refined oil price adjustment on September 6 was 86.11 US dollars/barrel, which was only an increase of 0.8% from the average corresponding to the last price adjustment. The calculated price adjustment range was per ton. Less than 50 yuan. However, as international oil prices continue to rise and remain high after September 6, it is expected that the next round of price adjustment window period will usher in an upward adjustment.

Gao Mingyu told a reporter from China Energy News: "As of September 13, the increase in the benchmark oil price for refined oil prices has reached 7.12% compared to the average of the previous round of price adjustments. It is expected that a new round of price adjustments will begin at 24:00 on September 20. The maximum retail price of oil will be increased to a certain extent."

Looking at the wholesale prices of gasoline and diesel from independent refineries, rising international oil prices have also caused gasoline and diesel prices to reach new highs during the year. Longzhong Information statistics show that as of September 6, the average market price of gasoline in Shandong independent refineries has risen to 8,950 yuan/ton, and the price of diesel has risen to 7,900 yuan/ton.

"Given that the peak season for gasoline consumption has basically ended, social traders have relatively sufficient stocks of diesel in the early stage, and the pressure on refined oil inventories in the local refining process has increased, the current round of increase in wholesale prices of gasoline and diesel is limited." Gao Mingyu said.

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The second half of the year is expected to continue the trend of shock and strength.

How long can the current rising international oil prices last? Many experts predict that international prices will most likely remain strong and volatile until the end of this year.

In Yang An’s view, as crude oil continues to be destocked, the overall tight supply side will remain a certain pattern in the second half of the year. "'OPEC+', especially Saudi Arabia's efforts to reduce production have still achieved results. If 'OPEC+' adheres to the strategy of stabilizing the oil market, oil prices will remain strong and volatile, and more extreme surges are not ruled out. This is the operation of oil prices in the second half of the year Main tone.”

Gao Mingyu also told a reporter from China Energy News: "In the second half of the year, when there is a gap between supply and demand for crude oil and the destocking cycle continues, oil prices will still fluctuate to a strong side. But according to the latest institutional balance sheet in September, supply and demand in the second half of the year will The gap has been slightly reduced, and the negative feedback of high oil prices on demand expectations has emerged. Therefore, in the upward cycle, we still need to pay attention to the top pressure of inflation and interest rate hikes coming again."

Wu Yan, an analyst at Longzhong Information, pointed out that OPEC crude oil production has dropped significantly since the beginning of this year, indicating that major oil-producing countries led by Saudi Arabia are fulfilling their previous production reduction commitments. "'OPEC+' extension of production cuts has led the market to expect a supply shortage in the oil market in the fourth quarter, so tight supply is expected to continue to support oil prices. However, negative factors cannot be ignored. The recent performance of U.S. stocks has weakened again, and the panic index has shown signs of recovery. , financial market risk appetite has heated up, and the continued high oil prices have kept U.S. gasoline prices at the highest level in the same period in ten years. While suppressing consumer demand, the Federal Reserve may once again face inflationary pressures and continue to raise interest rates to cool inflation. By then, the strength of the U.S. dollar will inhibit the use of crude oil The trading atmosphere of commodities is led by this. Therefore, although oil prices have continued to be high recently, we need to be wary of profit-taking and a fall after oil prices continue to rise." YSHX