[At the beginning of the crude oil market] oil prices fluctuated to hold the previous gains, waiting for the EIA report to be released

Huitong.com November 23rd - Wednesday (November 23) crude oil at the beginning of the session, oil prices fluctuated within a narrow range. US oil traded around 48.13 US dollars / barrel, an increase of about 0.21%; oil oil trading at 49.21 US dollars / barrel, an increase of about 0.33%. The two-day OPEC technical conference ended on Tuesday. Although no consensus was reached on the Iran issue, it strengthened the market expectation that OPEC reached a production reduction agreement. The latest API stock data shows that US gasoline inventories recorded a significant increase last week, but crude oil inventories, refined oil inventories and Cushing stocks all recorded declines. In addition, the US Thanksgiving holiday is coming, and the US dollar is trading lightly. These factors all provide some support for oil prices. However, overall, the market sentiment sentiment remained cautious, waiting for the US EIA inventory report to be released in the evening.

[At the beginning of the crude oil market] oil prices fluctuated to hold the previous gains, waiting for the EIA report to be released

On Tuesday (November 22), US WTI crude oil futures closed down 0.21 US dollars, or 0.44%, to 48.03 US dollars / barrel; Brent crude oil January futures closed up 0.22 US dollars, or 0.45%, to 49.12 US dollars / barrel. The two-day OPEC technical meeting has ended. Although OPEC's oil-producing countries failed to reach a consensus on the Iran issue at this meeting, the optimistic attitude of the OPEC technical committee strengthened OPEC's expectation of finally reaching a production reduction agreement. However, due to the strength of the US dollar and investors' doubts about the execution of OPEC, the trend of oil prices is still unclear.

[At the beginning of the crude oil market] oil prices fluctuated to hold the previous gains, waiting for the EIA report to be released
(The picture above shows the K-line chart of the January contract price of US NYMEX crude oil futures)

(The picture above shows the B-line chart of the Brent crude oil futures contract price)

According to Huitong.com, Reuters reported that OPEC sources did not give further details on the report of the committee. According to sources, the OPEC technical committee has "successfully" completed its work. The report of the technical committee will be handed over to the ministers before the meeting on November 30th. OPEC experts advised the oil captains to discuss 4-4.5% reductions in each oil-producing country next week, with the exception of Libya and Nigeria. Iran, Iraq and Indonesia have reservations about the proposed reduction of 4.5%.

According to the statistics of the Financial Times reporter, if Iran is excluded, OPEC will also reduce production by 110-1.3 million barrels per day. If each oil-producing country cuts production by 4-4.5% (excluding Nigeria and Libya), OPEC will cut production by 1.3-1.4 million barrels per day.

Huitong Finance analysts believe that although OPEC hopes to lay the foundation for the next week's production reduction meeting through technical meetings, the two-day technical meeting ended in a quarrel. Less than the last minute of next week, there is still a lot of uncertainty about whether the production reduction agreement is reached, and oil prices will continue to fluctuate in this environment.

According to the fundamentals of supply and demand, according to FX678 , the data released by the American Petroleum Institute (API) at 05:30 on Wednesday, Beijing, showed that the US crude oil inventories recorded a decrease of 1.28 million barrels in the week of November 18, and refined oil inventories decreased. 350,000 barrels, Cushing crude oil inventories decreased by 140,000 barrels. It is worth noting that API gasoline inventories increased by 2.68 million barrels, ending the decline for three consecutive weeks, the largest increase since the week of September 30.

Well-known financial zero-hedging commented that after OPEC news took the headlines, crude oil traders were more concerned about crude oil fundamentals. API data showed that gasoline inventories recorded a significant increase of 2.68 million barrels, but due to the decline in crude oil inventories, refined oil and Cushing stocks, oil prices did not fall significantly after the release of API data.

In addition, according to foreign media, the Canadian Petroleum Drilling Organization annual report pointed out that Canadian oil well activities are expected to rebound sharply in 2017. It said that due to the relative warming of oil prices and the fact that crude oil companies have cut costs significantly after more than two years of adjustment, Canada's active crude oil drilling may rise 31% from the current 3,762 to around 4,665.

From a geo-relationship, according to FX678, Bloomberg reported that the Colombian government will sign a new peace agreement with the rebel group "Colombian Revolutionary Army" on November 24. Colombia is an important producer and exporter of crude oil in the Latin American region. Huitong financial analysts believe that the conclusion of a peace agreement between the Colombian government and the "Revolutionary Armed Forces of Colombia" may increase crude oil production.

However, according to Huitong.com, Tim Evans, an energy analyst at Citi Futures, expects that Colombiaâ€™s crude oil production will not change immediately, but if Colombia maintains a peace situation, then the countryâ€™s There will be strong growth in crude oil supply and demand. He also pointed out that in 2015 Colombia's crude oil production averaged about 1 million barrels per day, and most of it was exported to the United States.

From the perspective of market linkage, the US existing home sales data and the Richmond Fed manufacturing index released on Tuesday were both brilliant. And, according to CME observations, the US Federal Interest Rate Futures Survey showed that the probability of a rate hike in December was 100%, and the probability is expected to be 95% on Monday. These factors all support the upward movement of the US dollar. However, with the arrival of the US Thanksgiving Day, the overall market trading was light, investors profit-taking, making the dollar's rise is limited. Under normal circumstances, a stronger US dollar will suppress the price of oil denominated in US dollars, while a fall in the US dollar will provide support for the upward movement of oil prices. Investors need to pay close attention to the dollar.

From market expectations, Barclays believes that the large-scale reduction in new investment in oil and gas projects may lead to a supply crisis by 2020. It is expected that 2019 will be the least increase in new capacity, and the gap between supply and demand of crude oil may reach 3 million barrels per day. 2019 will be a critical point in the supply crisis, but US shale oil will still increase production before this, but the problem of increased production is the number of supply and demand gaps and oil prices.

Croft, a commodities strategist at Royal Bank of Canada, believes that Saudi Arabia, as the most important country in the OPEC organization, expects an agreement. It is therefore expected that OPEC will reach an agreement on November 30th. A further decline in oil prices will increase Saudi Arabia's deficit, increase borrowing costs, and pose risks to Saudi Arabia's IPO. The smaller Gulf states will join forces with Saudi Arabia to help cut production and profit from the extra oil gains. At the same time, arrangements for Iran may be subject to change.

Kaitou macro believes that the agreement to reduce production on November 30 can not count on Saudi Arabia. First, Saudi policymakers fear that short-term boosts to oil prices will threaten their long-term position in the crude oil market. Second, Saudi Arabia has made many economic adjustments to adapt to low oil prices. The fiscal tightening has reduced the price of Saudi Arabia's budgetary balance to $70/barrel from $105/barrel in 2014. If the oil price rises to 60-65 US dollars / barrel next year, Saudi Arabia's budget and current account deficit will be greatly reduced, and the need to boost oil prices will fade. Third, the Saudi authorities tried to get rid of the country's dependence on oil. The 2030 vision was issued to boost the oil price and its vision. At the same time, Saudi Arabia did not want to use it to cheapen Iran.

IG Group market strategist Evan Lucas said that the OPEC frozen production agreement may push the oil price up to $50/barrel, but if it is a non-binding verbal agreement, the oil market may just start to react positively and then fall. To the $45-46/barrel range.

At 23:30 Beijing time on Wednesday, the US Energy Information Administration (EIA) will announce EIA crude oil inventories for the week of November 18, and investors should pay close attention. In addition, it is worth noting that due to the US Thanksgiving holiday, the total number of oil wells in the US to November 25th, which was scheduled to be announced at 02:00 on Saturday morning in Beijing, was announced to 02:00 am on Thursday, Beijing time. .

Huitong Finance Yihuitong market software shows that WTI crude oil reported 48.10 US dollars / barrel at 09:41 Beijing time; Brent crude oil reported 49.20 US dollars / barrel.