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Original title: FX168 Weekly Crude Oil Survey: Huge oil price hike could be a flash in the pan, major institutions lowered their demand expectations
FX168 Financial News (North America) This week, as talks between OPEC and its allies focused on the expected increase in production next year and positive vaccine news boosted market sentiment, crude oil prices rose sharply. The prices of Brent crude oil and WTI crude oil have soared since the beginning of the week, but then due to the sharp rise in US crude oil inventories, investor sentiment has faded and US drilling rigs have added platforms of perforation for the ninth consecutive week. Oil prices fell from high levels, but ultimately remained. A cumulative increase of more than 8% was recorded.
On the news side, due to the good news about vaccines, oil prices rose about 8% on Monday, the largest one-day increase in more than five months. John Kilduff, a partner of Again Capital in New York, said: “The oil market has reacted particularly strongly to this news because it is of great importance. The epidemic has had a huge impact on transportation. 80% of crude oil is used as a transportation fuel, so I think it is. A reasonable answer. “
OPEC and its allies will hold talks focused on delaying the projected increase in production by 3-6 months next year. As leaders, Saudi Arabia and Russia have publicly stated that they are thinking twice about plans to ease production reduction efforts in January.Fuel demand has been hit by the resumption of the epidemic. The Russian president and OPEC leaders have even mentioned options for further production cuts. But this idea has not received broad support so far.
In terms of data,International Energy Agency (IEA) continues to lower expectations on global oil demand in its monthly oil market report, Lowered demand for the third quarter of 2020 by 400,000 barrels / day to 8.8 million barrels / day, the fourth quarter of 2020 by 1.2 million barrels / day and the first quarter of 2021 by 700,000 barrels / day. day. OPEC also predicts in its monthly report that global oil demand will decline by 9.75 million barrels per day in 2020 (previously, it was a reduction of 9.47 million barrels per day) and, at the same time, lowered the forecast for growth in global oil demand in 2021 to 6.25 million barrels per day. (Previously the forecast was 6.54 million barrels per day). According to data released by the US Energy Information Administration (EIA), U.S. commercial crude oil inventories excluding strategic reserves increased by 4.278 million barrels to 488.7 million barrels, an increase of 0.9% over to the week of November 6, which was previously expected to decline by 1.9 million barrels. 7,998 million barrels.
According to the weekly financial markets survey FX168 released on Saturday (Nov 7), analysts and traders are generally bearish on crude oil next week.
Huijin Youdao’s Cao Bowen is bearish on oil prices next week. He believes crude will start attacking this week, with a maximum impact of US $ 43.0. This is the bottom trace of the rising channel since 25 June. It will change after the previous break. It became resistance and the three bullish waves from 33.6 also consumed bullish kinetic energy, so it entered the callback phase. Cao Bowen believes that crude oil will continue to fall from the $ 33.6 to $ 43.0 Fibonacci retracement line next week. The 38.2% ~ 50% retracement level corresponds to $ 38.3 ~ 39.4 and the strong support is around $ 36.6 ~ 37.0.
Koichi Murakami, analyst at Daiichi Commodities Co Ltd, said: “After the recent sharp rise in oil prices, the bulls have chosen to close as soon as possible, as the sharp rise in new koruna cases has prompted many countries to re-implement. travel restrictions and the global economic outlook are bleak, suppressing market sentiment. The new wave of epidemics continues to spread rapidly in many parts of the world and oil prices will continue to be under pressure next week. “
Citigroup analysts also remain cautious, saying the outlook for news on international supply and demand for two-line crude oil in 2021 is still bleak for the oil market bulls. Despite advances in vaccine research and development, achieving universal immunization is still a long way to go, even before the epidemic continues to spread. At the same time, many industries, such as aviation and tourism, suffered heavy losses during the epidemic and the entire population suffered a severe setback. Even if the epidemic disappears, in the face of the new market normal, it is expected that it will not be able to recover immediately, which will continue to demand the oil market. Build a lasting resistance. On the contrary, it is imperative and expected for OPEC + countries to further restore production capacity in 2021.
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