Crude oil consumption season

Crude oil prices have been in a strong turbulence pattern recently. With the arrival of the peak season, we believe that crude oil prices will remain strong in the later period. Among them, the Brent market has a higher probability of upward movement, and the New York market is subject to huge supply pressure, and the probability of strong turbulence is higher.

The summer of each year is the driving season for Europe and the United States, and it is also the peak period of electricity consumption. Crude oil prices often reach a stage high during this period.

The spot market has already anticipated the peak season for consumption. According to statistics from the American Automobile Association, retail gasoline prices in some cities in the central and western regions of the North have reached historical high levels. Due to better demand, maintenance of refinery equipment has resulted in tight supply and demand.

Crude oil prices hardly reproduce the bull market before 2007. The fundamental reason is that crude oil supply is no longer in short supply. Among them, the sharp increase in shale oil production in North America is the main output growth point in non-OPEC countries. U.S. shale oil production began to grow in 2011. From then on, the daily production of crude oil was 5.5 million barrels and today's 7.3 million barrels. The United States' crude oil production has increased by 32.7%. And this trend may continue. The increase in production led to a rapid rise in crude oil inventories in the United States. On April 19th, the United States’ crude oil business inventories once reached the highest level since the 1980s; after two weeks, crude oil inventories hit new highs above record highs. Only in the week of May 10, crude oil business stocks fell slightly. As refinery operating rates increased, some crude oil inventories were converted into refined oil products.

Looking ahead, the drilling volume of the four major shale oil producing areas in the United States will reach a new high of 17 months in mid-April, and the growth rate of 7.3 million barrels per day will remain. In addition, the U.S. Geological Survey issued an announcement in early May saying that North American Dakota, Montana, and several neighboring states have reserves of 7.4 billion barrels of shale oil, which is twice the estimated value five years ago. The feast of shale oil will continue. At the same time, the average daily export volume of crude oil in the United States is less than 50,000 barrels per day, the market is relatively closed, and the impact on the global market is relatively slow, especially in the case of poor transportation of shale oil production sites to petrochemical refineries.

Reuters surveys of shipping data and sources of oil companies, OPEC and consulting firms showed that OPEC’s daily output of crude oil in April is expected to increase by 280,000 barrels in March from 30.18 million barrels to 30.46 million barrels. However, even if the output increases, the supplier countries still hold the initiative, Saudi Arabia and Iran have to raise prices to importers. Non-OPEC supply beyond the United States is not ample.

It can be seen that the supply of crude oil in the world except North America is still tense. The supply side will not be the thrust of rising oil prices, but it will have less drag on crude oil prices.

In summary, the peak season for the consumption of crude oil is approaching, and demand will gradually increase, becoming an important driving force for the strong oil price. Supply in the global market outside the United States is still tight, and the supply side's drag on oil prices has weakened.