Although international oil prices rose on Friday (17th), they fell for the fourth consecutive week. While some of the decline is due to lower demand and increased supply, some of the decline appears to be technical and temporary, and there is good reason to believe that prices can rebound in the coming weeks, although some recent economic data is not extraordinary for oil bulls. Optimistic.
Storage capacity has increased in Cushing, Oklahoma, and Chinese refinery profits have fallen, a sign of weakening demand in the world’s largest oil importer.
The International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) have been lowering their 2024 global oil demand forecasts for months. The EIA currently expects the oil market to show a surplus of 100,000 barrels per day next year.
But some of the market’s problems are expected to reverse in the coming weeks.
One of the reasons for the increase in storage capacity in Cushing, Oklahoma is that the refinery has been undergoing seasonal maintenance and the current operation rate is very low. However, in the next few days, several U.S. refineries may end maintenance and switch to full operation, so it will Crude oil is pumped from Cushing storage and processed into gasoline and diesel. In fact, U.S. diesel inventories are near five-year lows, suggesting refiners can make money by producing more diesel.
The latest oil demand statistics are relatively benign. U.S. gasoline demand has been rising in recent weeks, partly because gasoline prices have been falling, while oil use in several other countries has remained relatively strong.
JP Morgan analyst Prateek Kedia wrote in a report: “From a regional perspective, the overall data on oil consumption released by various countries this week is very positive.”
Wall Street analysts on average expect Brent crude oil prices to rise to US$85.5 per barrel in 2024 from the current US$80.
Some of the pressure on oil prices may be market-driven rather than fundamentals-driven. Overall, pessimism among oil investors will drag prices down. Investors are placing twice as many bets on oil shorts as they were a year ago, and overall the bull-bear split is 14% more pessimistic than a year ago, according to calculations by Citi analysts.
A meeting of the Organization of the Petroleum Exporting Countries and Partners (OPEC+) later this month could be a catalyst for oil prices. Saudi Arabia’s Oil Minister and Crown Prince Abdulaziz bin Salman recently told the media that he believes the driving force behind the recent decline in oil prices is speculators, and that in fact oil demand is not weak. “The public is pretending demand is weak, but that’s just a ploy.”