The Rise in International Oil Prices Has Slowed Down, the Demand Signal is Still Strong
Us crude oil futures closed flat at $68.81 a barrel on Thursday, while Brent oil futures hit $71.99 a barrel at one point, the highest level since September 2019, closing down 0.1% at $71.31. At the beginning of Asian trading on Friday (June 4), US crude oil stayed near a nearly two-and-a-half-year high, and the market was waiting for the non-farm payrolls report to be released in the evening. Oil prices were basically flat on Thursday after rising for two consecutive days. As the demand outlook improved, US oil hit a new high of 69.40 US dollars per barrel in nearly two and a half years on Thursday, but gasoline inventories increased sharply and the dollar index rebounded sharply. Metro was blocked near the 70 mark. Despite optimistic expectations for the US non-farm payrolls report, oil prices have risen too much recently and investors need to beware of the possibility of bulls taking profits near the weekend.
JPMorgan analyst Natasha Kaneva and others said in a research report that the baseline forecast is for oil prices to reach $80 a barrel by the end of 2021, but a hotter-than-expected oil demand scenario could lead to oil prices reaching that level earlier. Analysts pointed out that the intensity of demand in the coming months “will affect everything from price direction to refining to OPEC+ supply decisions”. If demand develops in line with the bank’s expectations, OPEC+ is expected to agree to increase production by another 500000 b / d in August at its next meeting, bringing the net increase this year to 2.4 million b / d.
Global travel is expected to continue to recover, with Europe bearing the brunt, and India finally ushering in an inflection point. Gasoline demand, while still volatile, is stronger than the bank’s work-based travel indicators suggest, as the US summer travel season gets off to a good start, confirming an increase in travel. Although air travel in the United States has improved significantly since February, the situation in Asia has deteriorated and air travel in Europe remains depressed.
The latest data released by the US Energy Information Administration ((EIA)) showed that crude oil stocks fell for the second week in a row, with U.S. crude oil stocks falling by 5.08 million barrels in the week to May 28, below expectations of-2.443 million barrels. At the same time, more detailed reports show that weekly oil production in the United States fell from 11 million to 10.8 million in the same period, the first slowdown since April. The data are likely to encourage OPEC and its allies to develop a new production adjustment table at the next joint ministerial monitoring committee (JMMC) meeting, after acknowledging that “market fundamentals are strengthening and oil demand is showing clear signs of improvement”.
On the other hand, the dollar posted its biggest gain in three weeks on Thursday, hitting a three-week high of 90.55 as a series of strong US economic data reinforced expectations that the Fed might need to accelerate the withdrawal of stimulus policy. making commodities denominated in the currency less attractive and the rise in oil prices curbed. Moreover, the short-term bullish signal of the dollar index has increased significantly, which is disadvantageous to oil prices, and investors need to be vigilant. “the appreciation of the dollar is reasonable because the US economy seems to be coming out of the epidemic pattern, and the current indicators provide us with clear signs of momentum,” said Juan Perez, a foreign exchange strategist and trader at Tempus Inc.
The day focuses on the US non-farm payrolls report for May, the monthly rate of US industrial output in May, Euro area retail sales data for April and the trend of the dollar index. Traders are still waiting for Friday’s May non-farm payrolls report, which could set the tone for this month’s Fed meeting. Wall Street analysts generally expect non-farm payrolls to rise by 650000 in May.
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