FX168 Financial News Agency (North America) News: Crude oil prices have retreated after three consecutive weeks of declines, and traders are awaiting industry reports this week to confirm whether the recent declines are excessive. Analysts at Goldman Sachs Group Inc said resurgent demand concerns drove the sell-off, but consumption remained strong throughout the year and could continue that momentum in 2024. Goldman Sachs also lowered its price forecast for next year to $92/barrel. OPEC’s monthly report said “over-exaggerated negative sentiment” had driven prices lower, but recent data showed healthy fundamentals and strong global economic growth. The IEA will release its report tomorrow, and two EIA inventory data will be released later this week. Ole Hansen, head of commodity strategy at Saxo Bank, said that crude oil has started to return to the defensive this week, but so far, Brent and WTI crude oil have maintained above key support levels, which may indicate that the worst stage of long-term unwinding is over.
U.S. West Texas Intermediate (WTI) crude oil futures also rose $1.09, or 1.4%, to close at $78.26 per barrel.
(U.S. West Texas Intermediate (WTI) crude oil futures trend chart, source: FX168)
Brent crude oil futures rose $1.09, or 1.3%, to close at $82.52 per barrel.
(Brent crude oil futures trend chart, source: FX168)
[Market News Analysis]
Oil prices rose more than 1% on Monday after OPEC’s monthly market report eased concerns about weakening demand and a U.S. investigation into alleged violations of Russian oil sanctions raised concerns about potential supply disruptions.
OPEC said in a monthly report that oil market fundamentals remain strong and blamed speculators for the drop in prices. OPEC slightly raised its forecast for global oil demand growth in 2023 and stuck to its relatively high forecast for 2024.
OANDA senior market analyst Craig Erlam said in a note: “OPEC’s monthly oil market report appeared to push back on demand concerns, citing excessive negative sentiment surrounding Chinese demand, while raising its demand growth forecast for this year and maintaining its forecast for next year. Demand growth is expected to remain unchanged.
Reports of a U.S. Treasury crackdown on Russian oil exports also boosted oil prices, UBS analyst Giovanni Staunovo said. The U.S. Office of Foreign Assets Control issued notices to 30 ship management companies on Friday, requesting information on more than 100 vessels suspected of transporting Russian crude oil at prices above the price ceiling, Reuters reported, citing sources. It is the biggest move by the United States since the United States and its allies imposed price caps last year. Requests for information are a routine step in sanctions investigations. In December last year, the Group of Seven, the European Union and Australia implemented a $60/barrel cap on seaborne crude oil exports to Russia, prohibiting Western companies from providing transportation, insurance and financing services for oil exceeding the cap.
Last week, weak economic data from China, the largest importer of crude oil, heightened concerns about weak demand. Chinese refiners have asked for a reduction in December supplies from Saudi Arabia, the world’s largest exporter.
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The number of Americans traveling for Thanksgiving may hit a post-epidemic high, but it will not be able to boost gasoline demand. The U.S. Thanksgiving travel period will be the busiest since 2019, with 55.4 million Americans expected to travel 50 miles or more from home, the third-highest number since 2000, according to forecasts from the American Automobile Association (AAA). Number of travelers. As many as 49.1 million people are expected to travel by car, an increase of 1.7% from 2022. But increased holiday travel may not be enough to push U.S. gasoline demand above seasonal norms due to steady improvements in fuel efficiency. According to the Environmental Protection Agency, the average mileage per gallon in 2022 is 33.27 miles per gallon, which is 1.42 miles more than in 2021 and 6.7 miles more than a decade ago. That’s a huge fuel savings, not counting the rising share of electric and hybrid vehicles. U.S. gasoline consumption at the end of October was more than 3% below the five-year average, government data showed.
“Investors are more concerned about slowing demand in the United States and China, while concerns about possible supply disruptions caused by the Israel-Hamas conflict have subsided.” Hiroyuki Kikukawa, president of NS Trading, a subsidiary of Nissan Securities, said.
However, City Index analyst Fawad Razaqzada said oil prices may have bottomed out after falling about 4% last week and recording three consecutive weeks of declines for the first time since May. “Given the weakness in oil prices over the past few weeks, Saudi Arabia and Russia are likely to continue voluntary supply cuts next year. So this should limit the downside potential,” Razaqzada said.
The U.S. Energy Information Administration (EIA) said last week that U.S. crude oil production will grow slightly less than previously expected this year, while demand will fall. Next year, U.S. per capita gasoline consumption could fall to its lowest level in two decades, the report said.
Markets are wary of possible tightening of U.S. policy after Federal Reserve Chairman Jerome Powell said last week that the central bank could raise interest rates again if progress in curbing inflation stalls.
With financial conditions easing after Friday’s big rally, “there’s a good chance the Fed will make a more hawkish speech this week,” said IG market analyst Tony Sycamore. “Given that recent data from China and the United States have resurfaced concerns about growth, this is not a prospect that crude oil will welcome,” he said.
In addition, Chinese refiners asked Saudi Arabia, the world’s largest exporter, to reduce supply in December.
Analyst Grant Smith said that Iraq is once again pushing to restart an oil pipeline that has been interrupted for seven months, which may become the next growth point for crude oil supply and may also become a potential headwind for oil prices. Iraq’s oil minister said he was negotiating with the Kurdish regional government to restart the oil pipeline, which has a daily capacity of about 500,000 barrels, and Turkey, which has been at the center of the incident, has expressed its willingness to resume operations. If the negotiations are successful, Iraq will be able to once again transport oil to the northern Mediterranean, which means increased production. But there are also reasons to view this risk with caution: Throughout the pipeline closure process, the parties have repeatedly missed opportunities to reach reconciliation; Iraq has diverted flow from the closed oil pipeline to domestic refineries, which means that there is less idle production ready to be restored Separately, Iraq insists it is committed to controlling output, and Saudi Arabia is likely to urge other members to comply when it meets later this month given weak oil prices.
However, Kikukawa said oil prices would be supported if WTI approached $75 a barrel.
“If the market falls further, we may see supportive buying as Saudi Arabia and Russia are expected to decide to continue voluntary production cuts beyond December,” Kikukawa said.
Top oil exporters Saudi Arabia and Russia confirmed last week that they would continue voluntary oil production cuts until the end of the year as concerns about demand and economic growth continue to weigh on crude markets.
It is also reported that U.S. lawmakers are now considering legislation that would impose measures on foreign ports and refineries that process Iranian oil exports.
On the supply side, U.S. energy companies cut the number of operating oil rigs for the second week in a row to the lowest level since January 2022, energy services company Baker Hughes said. Rig count points to future output.
The U.S. Energy Information Administration (EIA) said last week that the country’s crude oil production will grow slightly less than expected this year and demand will fall. On Monday, the EIA forecast U.S. oil production would fall for a second consecutive month in December. The EIA said it expected oil production to fall to 9.652 million barrels per day in December from 9.653 million barrels per day in November.
Last week, top oil exporters Saudi Arabia and Russia, part of the OPEC+ group, confirmed they would continue voluntary oil production cuts until the end of the year as concerns about demand and economic growth continue to weigh on crude markets.
Investors need to note that the Organization of the Petroleum Exporting Countries (OPEC+) and allies including Russia will hold a meeting on November 26.
Goldman Sachs expects commodity returns to increase over the next 12 months as spot prices rise due to easing monetary policy and recession fears, while the asset class also strengthens as a hedge against political supply risks. The bank forecasts a 12-month commodity return of 21% for the oil-heavy S&P GSCI Commodities Index, with energy and industrial metals returning 31% and 17.8% respectively. “We recommend going long commodities in 2024 as we expect attractive carry returns from structural tailwinds as the cyclical backdrop improves and spot commodity prices are set to rise, arguing that hedging value will offset negative supply shocks. Goldman Sachs said OPEC-driven declines in oil inventories and demand for so-called green metals will also boost commodity returns. “In other assets,” the bank wrote Energy and gold can also be an effective hedge against negative supply shocks from political or other developments amid slowing growth, especially in risk assets. The bank expects “sustained elasticity” in demand to drive a recovery in oil prices, including a pickup in the fourth quarter. Factors including the possibility of oil prices and increased supply from some oil-producing countries prompted the bank to lower its average Brent crude oil price forecast in 2024 to $92/barrel from the previous $98/barrel.
[Focus on financial data and events in the next trading day (Beijing time)]
① 10:00 U.S. Treasury Secretary Yellen holds a press conference
② 15:00 UK unemployment rate in October
③ 15:00 Number of people applying for unemployment benefits in the UK in October
④ 15:45 Swiss National Bank President Jordan delivers a speech
⑤ 16:00 Fed Williams delivers a speech
⑥ 17:00 IEA releases monthly crude oil market report
⑦ 18:00 German ZEW Economic Sentiment Index in November
⑧ 18:00 Eurozone third quarter GDP annual rate revision
⑨ 18:00 Eurozone November ZEW Economic Sentiment Index
⑩ 18:00 Quarterly employment rate in the Eurozone after seasonally adjustment in the third quarter
⑪ 18:30 Federal Reserve Vice Chairman Jefferson delivered a speech
⑫ 19:00 US October NFIB Small Business Confidence Index
⑬ 21:30 US October non-seasonally adjusted CPI annual rate
⑭ 21:30 US October seasonally adjusted CPI monthly rate
⑮ 21:30 U.S. core CPI annual rate in October without seasonal adjustment
⑯ 21:30 US October core CPI monthly rate
⑰ 21:30 Federal Reserve Barkin delivers a speech
⑱ Fed Goolsby delivered a speech at 01:45 the next day
⑲ 05:30 the next day, API crude oil inventories in the United States for the week to November 10
⑳ At 06:00 the next day, MSCI released the November index review report