SMM News: before the tanker attack in the Gulf of Oman, the United States once again pointed the finger at Iran. At the same time, the recent shooting down of a US drone by Iran has set off tensions between the United States and Iraq.
Platts Energy said the incident was enough to cause oil prices to soar, but in fact oil prices did not rise as much as the incident. The reason for this is that traders have not responded clearly to the possible conflict between the United States and Iraq and will remain concerned about changes in demand for crude oil.
Platts Energy: the rise in Oil prices does not match the Market risks caused by the Geo-situation
Platts energy tracking data show that Brent crude rose more than 4% in a short period of time after the attack on the tanker on June 13, leaving the station around $62. Then on June 20, when Iran hit US drones, Brent crude rose by more than 5 per cent.
But the agency said the increase was inconsistent with the market risks associated with the incident, because the Strait of Hormuz controls 1/5 of the world's crude oil exports.
Ole Hansen, head of commodity strategy at Shengbao Bank, said: "I think the response in the crude oil market is limited, which shows that traders are still waiting and only when Iran makes it clear that it will close the strait and lead to US involvement will push oil prices higher further."
In fact, before the tanker attack, Brent crude fell below the $60 mark for the first time since late January, so former US crude stocks were higher than expected, raising concerns about oversupply caused by insufficient demand.
In fact, despite the damage to crude oil transport and intermediate infrastructure, Brent crude has fallen by as much as $13 since May due to concerns about the global economic slowdown due to crude oil stocks and weak demand. Even though oil prices have rebounded in recent trading days, it is still $8 short of the May high.
In addition, Trump played down the impact of the drone shooting down in Iran, which has partly allayed concerns in the market. It is reported that Trump suddenly withdrew his plan to launch several Iranian targets after approving military strikes against several Iranian targets. At the same time, Trump also said on Monday that he was willing to hold talks with Iranian leaders without any prerequisites.
So for a short time traders once again turned to the supply and demand side.
Fears of slowing demand are becoming more and more obvious
Us crude stocks rose by 2.21 million barrels to 4.8547 million barrels in early June, while US crude stocks, excluding its strategic reserves, have increased by nearly 50 million barrels since the end of January, according to the data.
Platts energy data show that current crude oil production is up 1.4 million barrels per day from a year ago, consolidating the position of the United States as the number one oil producer.
But at the same time, analysts are also downgrading demand forecasts for the oil market. The International Energy Agency cut crude oil demand for 2019 by 100000 barrels per day to 1.2 million barrels per day on June 14, and OPEC also lowered its crude oil demand growth forecast, warning that the trade situation is the most direct factor affecting crude oil demand.
Hansen said the three major energy agencies believe that the pressure of demand growth and the crude anti-seasonal rise in crude oil depots in the United States will continue to put pressure on oil prices.
OPEC has little choice
Given this fact, OPEC+ seems to have no choice but to extend the 1.2 million b / d production reduction agreement and work with Russia as much as possible to push up oil prices.
The current OPEC deal focuses on whether to cut production further, which could lead to more market share in the United States, while the latter is one of the main differences between Russia, which had hoped to cut production to 900000 barrels a day, and OPEC.
At the same time, crude oil production in the United States continues to increase, reaching 12.4 million barrels per day in 2019 and 13.3 million barrels per day in 2020. If demand for crude oil remains low, it will cause further damage to oil prices.
Although there are still differences among OPEC+ members, especially Iran. Iran opposes rescheduling the meeting under the current situation. Iran's oil industry has been subject to full sanctions by the United States and has not been supported by OPEC+ partners. Iranian production is now down nearly 230000 barrels a day from last month, to only about 2.2 million barrels a day.
But considering that demand growth is already significantly slower than output growth, OPEC+ has had to extend the production reduction agreement.
Huitong warned that as the recent standoff between the United States and Iraq intensifies, and the United States has made substantial moves, if the United States does take action, it could make the geo-situation dominant for a short time. But if the United States and Iraq only stay in cyberwarfare and there are no signs of further escalation, then demand remains the dominant factor in the market. At the same time, the market also needs to pay attention to the meeting of signatories to the Iran nuclear agreement this weekend, when the corresponding measures may be taken to rescue the agreement.
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