[At the beginning of the crude oil market] oil prices fluctuated slightly, and the production reduction supervision meeting hit this weekend.

Huitong.com January 20th news - Friday (January 20th) crude oil at the beginning of the session, the shock rose slightly. US oil traded at around 52.29 US dollars / barrel, an increase of about 0.33%; oil oil trading at 54.34 US dollars / barrel, an increase of about 0.30%. Although the API and EIA inventory reported bad oil prices, the IEA monthly report showed that OPEC crude oil production fell in December 2016. Moreover, major oil producing countries have shown signs of positive production cuts.

In addition, on Friday (January 20), the Asian market was weak, and the US dollar was weakened by the suppression of Fed Chairman Yellen’s speech. These factors all support the oil price to a certain extent. The OPEC and non-OPEC Production Steering Committee plans to meet in Vienna on January 21-22 to assess progress in reducing production. Investors need to pay close attention.



On Thursday (January 19th), US WTI crude oil February futures closed up 0.29 US dollars to 51.37 US dollars / barrel, or 0.57%; Brent crude oil futures closed up 0.24 US dollars, reported 54.16 US dollars / barrel, or 0.45% . Although API and EIA stocks report negative oil prices, the IEA monthly report said that global oil market supply is slowly tightening. In addition, the positive attitudes of Saudi Arabia, Russia and other OPEC Secretary-Generals, as well as the weakening of the US dollar, all supported oil prices to a certain extent. Oil prices bumped upwards and closed up slightly.


(The picture above shows the US contract price of the NYMEX crude oil futures contract in February)


(The picture above shows the B-line chart of Brent crude oil futures March contract price)

According to Huitong.com, the OPEC and non-OPEC production reduction supervisory committee plans to meet in Vienna on January 21-22 to assess the progress of its production cuts and will try to eliminate market concerns about cheating. As the data on production cuts in January 2017 has not yet been released, one of the problems that will be resolved at this meeting is the estimation of production and exports of major oil producing countries. Investors need to pay close attention to this.

Saudi Energy Minister Falih said on Thursday (January 19) that many countries have cut production beyond the level of commitment, and the oil market is likely to achieve a balance in the first half of this year. If the market returns to equilibrium, there is no need to extend the production reduction agreement to the full year. In the past, there have been many times when OPEC increased its efforts to reduce production when necessary. OPEC can further reduce production, but this is not necessary. If OPEC further cuts production, it will result in a shortage of crude oil supply. If the price of crude oil does not rise, there are still other plans. The current oil investment is still not enough, and it is necessary to invest in large projects. US shale oil growth will once again be eased by rising costs, and US shale oil will not overwhelm OPEC. The equilibrium price of crude oil is in the range of 50-100 USD/barrel. The previous three-digit oil price triggered a surge in supply. Oil prices in the $40-50/barrel range are not enough to attract enough investment.

The Russian economy minister said on Thursday (January 19) that Russia hopes that the oil market will be sustainable, not high oil prices. Russia is fully committed to implementing production reduction agreements. There is currently more concern about oil demand. Future curves indicate that oil supply will decrease.

OPEC Secretary General Balkindu said on Thursday (January 19) that the average supply cuts in the first half of the year were 1.8 million barrels per day. The determination of countries to comply with the production reduction agreement is unparalleled. The ultimate goal of OPEC's production cuts is to accelerate the process of crude oil destocking, with the goal of bringing crude oil inventories to a five-year average. OECD stocks have fallen below the level of 3 billion barrels. Recognize Russia's commitment to working with OPEC for a long time.

The Director of the International Energy Agency (IEA), Biro, said on Thursday (January 19) that the willingness of oil-producing countries to implement a production cut agreement would be firm, and oil prices would rise further or lead to an increase in shale oil production. Do not underestimate the reaction of shale oil producers, and shale oil may again put downward pressure on oil prices. The growth rate of oil production in 2017 will not be limited only by US shale oil production. The growth rate of US oil demand has weakened in November-December last year. The International Energy Agency may raise US shale oil expectations. Investment in the crude oil industry in 2017 may not rebound sharply. However, in the next few years, there will be insufficient supply of crude oil.

In addition, according to the Wall Street Journal, the International Energy Agency said on Thursday (January 19) that non-OPEC countries have increased oil production, putting pressure on OPEC countries and possibly making the OPEC production reduction agreement counterproductive. According to the latest IEA monthly report, non-OPEC countries have signs of increasing production, or boosting oil investment due to rising oil prices. To this end, the International Energy Agency raised its forecast for 2017 crude oil growth by 175,000 barrels per day to 380,000 barrels per day.

From the supply and demand fundamentals, data released at 00:00 on Friday (January 20) in Beijing time showed that the US EIA crude oil inventories increased by 2.347 million barrels in the week ended Jan. 13, which is expected to increase by 31,200 barrels; Cushing area Crude oil inventories decreased by 1.274 million barrels, expected to increase by 154,800 barrels; gasoline inventories increased by 5.051 million barrels, expected to increase by 2,352,500 barrels; refined oil inventories decreased by 968,000 barrels, expected to increase by 457,400 barrels; EIA refinery equipment utilization rate is 90.7%, expected to be 92.9%.

In addition, the EIA report also showed that the United States in addition to strategic reserves of commercial crude oil inventories increased by 2.347 million barrels to 485.5 million barrels, an increase of 0.5%; in addition to strategic reserves of commercial crude oil last week imported 8.378 million barrels / day, compared with the previous week decreased by 674,000 barrels /day. Last week, US domestic crude oil production fell by 2,000 barrels to 8.944 million barrels per day, and remained below the 9 million barrels per day for 41 consecutive weeks.

The financial “zero hedging” commented that the API recorded a decrease in crude oil inventories and an increase in gasoline inventories. Earlier, the Director of the International Energy Agency and the Saudi Energy Minister spoke successively, and multiple factors caused oil prices to rise, but EIA crude oil inventories and gasoline inventories were both The record increased, and the US oil production remained at a 41-week high. The oil price was under pressure and the US crude oil supply is expected to continue to increase.

The monthly report on the crude oil market released by the International Energy Agency (IEA) on Thursday (January 19) shows that the global oil market is slowly tightening due to rising demand. At the same time, the agreement between OPEC and non-OPEC oil producers is still in the “observation period”, and it is still too early to judge the implementation of the agreement. Moreover, the US oil production will also rebound under the leadership of shale oil.

The IEA monthly report showed that OPEC crude oil production fell by 320,000 barrels per day to 33.09 million barrels per day in December, due to the reduction in production in Saudi Arabia and the destruction of supply in Nigeria. And "preliminary signs" indicate that production may fall even more sharply in January as the production cuts take effect. Saudi oil production in December was 10.48 million barrels per day, down from last month. The monthly report predicts that non-OPEC countries will increase their supply in 2017 by 385,000 barrels per day, and increase global demand for crude oil daily by 100,000 barrels to 9.7 million barrels.

Huitong.com reminded: On Saturday (January 21), Beijing time, the report on the total number of oil-drilling Baker Hughes oil wells in the US as of January 20 will be announced. Investors should pay close attention.

From the perspective of geographical relations, according to FX678 quoted foreign media reports, Iraq said that it began to maintain the RUMAILA and MAJNOON oil fields.

In terms of market linkage , the US dollar index once fell short-term in the Asian market during the Asian market on Friday (January 20), when Federal Reserve Chairman Yellen made a speech on "economic prospects and monetary policy behavior" at the Stanford University Economic Policy Research Institute. Point to 100.96. Because Yellen said that the Fed policy is not lagging behind, it means that the Fed will not catch up with interest rate hikes. This is the main driving force behind the short-term decline of the US dollar index. In addition, there are some panic in the market before Trump takes office. Under normal circumstances, a stronger dollar will weigh on the dollar-denominated oil price. The weaker dollar will support oil prices to a certain extent. Investors need to pay close attention to the dollar.

From the market expectation, the oil market has shown signs of recovery in the near future, but the International Energy Agency Director Biro warned that the oil market will have more volatility. One important reason is the uncertainty of US shale oil production. It is estimated that the US shale oil output will increase by 170,000 barrels per day in 2017, and the increase rate can sometimes reach 500,000 barrels per day, and it is still possible to be raised.

Huitong Finance Yihuitong market software shows that WTI crude oil reported 52.24 US dollars / barrel at 10:37 Beijing time; Brent crude oil reported 54.33 US dollars / barrel.