How can OPEC+production increase plan and US inventory data reshape the future market landscape?

2024-06-09 2561

    In the complex landscape of the global energy market, every fluctuation in crude oil prices is affecting the nerves of investors. Recently, oil prices have hovered near a four month low in late Asian trading, and the market is digesting OPEC+'s decision to increase supply later this year. At the same time, the increase in US crude oil and finished oil inventories has also had an impact on oil prices.

    As of 15:40 Beijing time, Brent crude oil futures were trading at $77.78 per barrel, up $0.25; West Texas Intermediate Oil Futures in the United States closed at $73.47 per barrel, up $0.21. Both types of crude oil futures experienced a nearly $1 decline on Tuesday, reaching their lowest settlement level since early February, and a significant decline of about $3 per barrel on Monday.

    OPEC+Supply Plan: A Test of Market Confidence

    OPEC+recently announced that despite signs of slowing demand growth, the organization still plans to increase supply starting from October. This news has caused waves in the market. Helima Croft, head of commodity research at RBC Capital, pointed out in a market report that Brent crude oil prices still face pressure as market participants view OPEC's proposed voluntary production reduction timetable as a binding commitment to increase supply by 500000 barrels per day in the fourth quarter of 2024, regardless of the outlook for oil fundamentals or confidence at the end of the summer.

However, the speech of Saudi Energy Minister Prince Abdulaziz provided some comfort to the market. He said that if demand is not sufficient to absorb the increase in supply caused by the lifting of production cuts, OPEC+will suspend the lifting of production cuts and even reverse operations to maintain market stability.

    The analyst team of ING, led by Warren Patterson, believes that crude oil supply is expected to tighten in the third quarter, while OPEC+'s production reduction plan will not be implemented until October. They pointed out in the market report that the scale of selling off of contracts in the near month may be too large, suggesting that the market's response to OPEC+plans may be too pessimistic.

    US inventory data: unexpected bearish news

    In addition to the impact of the OPEC+supply plan, the US crude oil inventory data has also had an impact on the market. According to data from the American Petroleum Institute (API), in the week ending May 31, US crude oil inventories unexpectedly increased by over 4 million barrels, far exceeding analysts' predicted decrease of 2.3 million barrels. Independent energy analyst Tim Evans commented that the crude oil data in the API report was clearly a bearish surprise.

    The increase in gasoline inventory also exceeded expectations, increasing by over 4 million barrels, which is twice the analyst's expectation. The release of these data undoubtedly intensified the bearish sentiment in the market. The US Energy Information Agency (EIA) will release official inventory data on Wednesday evening Beijing time, which will further affect market expectations for oil prices.

    Analyst's viewpoint: Market sentiment and technical analysis

    In the current market environment, the views of analysts are particularly important. Analysts from well-known institutions generally believe that although OPEC+plans to increase supply, the market's response to this news may be too intense considering the uncertainty of the global economy and fluctuations in demand. Meanwhile, the unexpected increase in US inventory data has also added uncertainty to the market.

    From a technical analysis perspective, oil prices are currently in a critical support area, and any further news about supply or demand may trigger significant price fluctuations. Analysts suggest that investors closely monitor the follow-up dynamics of OPEC+and changes in US inventory data, which will directly affect the future trend of oil prices.

    Against the backdrop of global economic recovery and energy transformation, the future of the crude oil market is full of uncertainty. The supply plan of OPEC+and inventory data in the United States are two important factors affecting market sentiment. Investors need to remain vigilant, closely monitor market trends, and also consider macroeconomic trends and geopolitical risks.

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