European And American Stock Markets Hit A Record High, Looking Forward To Increasing Production, And The Oil Jedi Rebounded 5%

In the past week, the US crude oil held a support near 49.31 and rebounded. The market generally predicted that the impact of public health events on the economy and demand was relatively limited. The global stock market rebounded sharply, and European and American stock markets hit a record high, providing support for oil prices. Besides, the market predicted that the OPEC+ oil producing countries would increase the scale of production reduction and provide higher oil price opportunities.

Mei Po two oil recorded the best performance since December 6, 2019; crude oil rose 3.79% this week, the highest hitting 52.34 US dollars / barrel, a new high since February, closing at 52.25 US dollars / barrel; Brent crude oil accumulated 5.03% this week, the first weekly rise in six weeks, the highest touch of 57.53 U. S. dollars / barrel, also a new high of nearly two weeks, reporting 57.24 dollars / barrel.

European and American stock markets have hit record highs. Asian stock markets are also optimistic, improving demand prospects.

Fears of public health events once reduced crude oil prices by about 20% since hitting a high point in January 8th. But with the resumption of factory production in China and the easing of monetary policy by the Chinese government, this week's worries have cooled significantly, and global stock markets have risen, easing concerns about the prospect of oil demand and providing an opportunity for oil prices to rebound.

　　 (US crude oil main contract daily chart)

On the Asian stock market, the Shanghai Composite Index rose 1.43% this week for the second consecutive week, and has recovered most of the declines after the Spring Festival. Hongkong's Hang Seng Index rose 1.50% this week and the South Korean composite index rose 1.43% this week. European stock market, the Storck 600 index rose 1.49% this week, a record high to 432.26 points in the market, the S & P 500 index this week rose 1.58%, a record high to 3385.09 points in the market, the Dow Jones industrial average rose 1.02% this week, the intraday has set a record high to 29568.57 points.

In a report, Jim Ritterbusch, President of Ritterbusch and Associates, said that the massive clearing of positions in January, which pushed oil prices down sharply, may have ended, instead of the recent accumulation of speculative positions and shorts in the market.

Leo Mariani, an analyst at KeyBanc Capital Markets, said the rise will no doubt inspire more confidence in the oil market.

Rebecca Babin, senior stock trader at CIBC Private Wealth Management, said the market is increasingly feeling that we have hit bottom. The oil market has already digested the worst, and as long as the situation outside China has not intensified, the oil market may show greater resilience.

Edward Moya, a senior market analyst at OANDA in New York, pointed out that "oil prices seem to have stabilized this week, because the market is optimistic that OPEC+ will tighten its output again at any cost, and it is also expected that public health events are approaching the peak."

However, Yang Yan, a market analyst at CMC Markets, pointed out that "the sentiment in the Asia Pacific region is still cautious, because the uncertainty of public health events is not clear enough for the global oil demand to be compromised."

OPEC+ oil producing countries will probably expand production scale.

Another factor in supporting oil prices this week is the widespread market expectation that the OPEC+'s main oil producing Congress will expand production and production cuts to cope with the decline in demand; although the Russian government has not yet made a decision on further production cuts. But sources in the industry say that the oversupply of Russian crude oil and the prospect of a major bank selling a lot of money will make the reason for the reduction of crude oil production even more adequate.

　　 (Brent crude oil main contract daily chart)

In the past two weeks, Saudi Arabia has been urging OPEC members and their allies to meet this month to consider further cuts in production as public health events hit China's needs. At present, OPEC+ oil producing countries are considering a maximum reduction of 2 million 300 thousand barrels per day.

Several OPEC representatives revealed that OPEC and its allies were close to abandoning the plan to hold an emergency meeting, but Saudi Arabia has not completely abandoned its proposal. Saudi Arabia (Saudi Arabia) Arabia has been trying to persuade Russia to agree to a further reduction in production. Moscow has said it will announce its position in the next few days.

OPEC+'s current yield reduction agreement expires at the end of March. Since OPEC and non OPEC oil producing countries began to cooperate in oil market in 2016, Russia has been playing a core role in the OPEC+ alliance. OPEC and non OPEC oil producing countries were scheduled to meet in early March to discuss further actions, but public health incidents affected oil prices. Some people called for early meetings.

Ravil Maganov, the first executive vice president of Luke petroleum, told reporters after the talks between Russian oil companies and Russian energy minister Novak (Alexander Novak). "(government) has not yet made a decision. We have discussed all the cases. Most (oil companies) tend to extend their production by one quarter. "

Kazakhstan energy minister Nurlan Nogayev also said that Kazakhstan and Russia will co-operate to reach a common position on possible further reduction in production. "We will mutually agree on our position, because Kazakhstan and Russia are strategic partners."

It is worth mentioning that the market also signals that there are still some short-term oil demand. On Friday /5 April, the Brent crude oil futures narrowed to only $0.01 / barrel, only 0.33 dollars a week ago. The narrowing of the positive spread (long term premium) suggests that Brent's oil demand is improving.

Goldman Sachs lowered its oil price expectations in three months.

This week, OPEC, EIA and IEA all lowered their demand for crude oil, but the monthly report also generally reflected the decline in crude oil production. The IEA monthly report showed that in January, OPEC crude oil output dropped to nearly ten years low, and also provided some support for oil prices. But the famous investment banks also lowered the oil price expectations, and investors still need to be vigilant.

In its monthly report, the International Energy Agency (IEA) said that OPEC crude oil output fell to its lowest level since the recession in January in January. January was also the first month for OPEC+ to promise further cuts in production. The 10 members of the agreement were 500 thousand yuan / day lower than the new target of the group, with a 143% compliance rate.

But in the monthly report, the International Energy Agency (IEA) also pointed out that with the impact of public health events, global crude demand will decline for the first time in more than ten years this quarter. This expectation indicates that despite the latest production cuts of OPEC and its allies, the crude oil market will still face severe oversupply. The crisis is still ongoing, and it is difficult to make a precise judgement at the moment.

Goldman Sachs analysts such as Damien Courvalin will cut the price of Brent crude and WTI crude in the first quarter by 10 US dollars / barrel, on the grounds that demand has been badly hit after the outbreak of public health emergencies.

Analysts at Goldman Sachs pointed out that oil demand may be reduced by 4 million barrels per day, which will be a peak level. Now it is estimated that the new oil demand in 2020 will be 600 thousand barrels per day, compared with 1 million 100 thousand barrels previously expected.

Goldman Sachs said in the report that Brent crude oil price in the first quarter was expected to be 53 dollars, and the subsequent quarters were 57 US dollars, 60 US dollars and 65 US dollars respectively. At present, WTI is expected to report US $48.50 in the first quarter and 52.50 US dollars, 55.50 US dollars and 60.50 dollars in the following quarters.

Future outlook: investors need to continue to pay attention to the relevant news of public health events and the expected changes in market demand for the demand. At the same time, we need to pay attention to the relevant news of the major oil producing countries such as OPEC+ about expanding the scale of production reduction. From the perspective of market expectations and technology, oil prices will rebound further in the coming week.