[At the beginning of the crude oil market] The US dollar index temporarily fell back overnight, and the oil price rebounded slightly.

Huitong.com December 8th – At the beginning of the crude oil market on Thursday (December 8th), oil prices rebounded slightly. US oil traded around $50.05/barrel, an increase of about 0.56%; oil oil traded around $53.17/barrel, an increase of about 0.30%. Although the latest US EIA crude oil inventory data fell more than expected last week, gasoline inventories, refined oil inventories and inventories of crude oil inventories all recorded an increase, offsetting the positive impact of the decline in crude oil inventories.

Although some oil-producing countries expressed positive attitudes on Wednesday, the OPEC and Russia's crude oil output in November both recorded new highs, and the market still questioned OPEC's ability to implement production reduction agreements. The US dollar index temporarily fell back, or provided a certain degree of support for oil prices. OPEC and non-OPEC oil producers will hold a meeting on December 10 to discuss production cuts, investors need to pay close attention.



On Wednesday (December 7), WTI crude oil futures contract closed down 2.28% to $49.77 per barrel. Brent crude oil futures closed down 1.72% to $53.00 per barrel. The market is still waiting for OPEC and non-OPEC to meet in Vienna this Saturday (December 10). Although some oil-producing countries have expressed positive attitudes, the market is still deeply worried about the increase in production before the major oil-producing countries officially cut production, which has caused oil prices to fall sharply. Although the latest US EIA crude oil inventories fell more than expected, gasoline inventories, refined oil inventories and inventories of crude oil inventories increased significantly, offsetting the positive impact of the decline in crude oil inventories.


(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 foreign media reports quoted by Huitong.com, the Nigerian oil minister said on Wednesday that he hopes that by the end of the first quarter of 2017, the oil price will be close to $60/barrel, and OPEC countries will abide by the production reduction agreement. Even if only Russia promises to cut production, the OPEC agreement will not be affected. It is expected that oil prices will be in the range of 50 US dollars to 60 US dollars per barrel next year, and the oil market will resume its balance in the first half of next year; the reduction of production by OPEC and non-OPEC oil producing countries should help the oil market reach equilibrium in the middle of next year; it is expected to be on Saturday and non-OPEC countries. After the meeting, more production will be cut, and it is expected that non-OPEC countries will cut production by more than 600,000 barrels per day. The crude oil production target for January is 2.1 million barrels per day, and Nigeria's current crude oil production is 1.8 million barrels per day. I hope that in December 2017, the price of oil will be at $60/barrel.

The Venezuelan oil captain said on Wednesday that the oil market will return to equilibrium within 6-9 months after the agreement is reached. Venezuela proposes that Russia and Oman participate in the Global Petroleum Agreement Supervisory Committee. OPEC aims to stabilize oil prices, and oil prices should not be too high. The goal of the Global Petroleum Protocol Oversight Committee is to ensure that global oil prices are between $60 and $70 per barrel. Russia has played a key role in reaching a crude oil production agreement.

Kazakhstan’s energy minister said on Wednesday that Kazakhstan’s crude oil production in 2016 is expected to be 8.9 million tons. Since September 28, Kazakhstan’s crude oil production has exceeded 600,000 tons, of which 500,000 tons have been exported. The dialogue between OPEC and non-OPEC countries will support OPEC's position on production cuts.

The UAE oil captain said that Russia’s sincerity can be seen from the beginning. If the non-OPEC countries cut production this weekend, oil prices will rise and shale oil may rebound. A reduction of 1.8 million barrels per day will balance the market. The purpose of reducing production is to balance the market. The price of oil will be directed by the market. There is hope for OPEC's Vienna meeting and expect non-OPEC countries to make more production cuts. If oil prices fall again, OPEC will take measures. I hope to do my utmost to avoid the sharp rise and fall of oil prices. Even if the oil price is at the average price of $50/barrel, the investment will shrink.

Huitong.com reminds: OPEC and non-OPEC meetings will be held in Vienna on December 10th. Currently, there are 14 countries in the list: Mexico, Oman, Kazakhstan, Bahrain, Colombia, Congo, Egypt, Russia, Trinidad And Tobago, Turkmenistan, Azerbaijan, Bolivia, Brunei and Uzbekistan.

The OPEC representative said on Wednesday that the 14 non-OPEC oil producers invited by OPEC will not increase the oversupply. It is hoped that the reduction of production of 300,000 barrels per day in Russia will actually reduce production.

Huitong financial analysts believe that although the latest US EIA crude oil inventory data fell more than expected last week, but now, the focus of the market is still the implementation of the OPEC production reduction agreement and cooperation with non-OPEC countries. After OPEC and Russia announced a joint production cut agreement last week, oil prices rose by up to 19%. However, as OPEC and Russia's crude oil output in November both recorded new highs, the outside world questioned whether the scale of production reduction in the production reduction plan was enough to end the oversupply situation in the oil market.

Jeffrey Halley, senior market analyst at OANDA in Singapore, said that Russia and OPEC both set a production record, and the market doubts whether OPEC can complete the production reduction target reached at the Vienna meeting. Suspicion is justified because the higher the output of OPEC and Russia, the higher the starting point for production cuts.

From the perspective of supply and demand fundamentals, the US Energy Information Administration (EIA) data released at 23:30 on Wednesday (December 7) in Beijing showed that as of December 2, the US EIA crude oil inventories fell by 2.389 million barrels for three consecutive years. Weekly decline, expected to decline by 1,372,700 barrels; gasoline inventories increased by 342.50 million barrels, an increase of four consecutive weeks, the largest increase since the week of March 2, expected to increase by 15.000 million barrels; refined oil inventories increased by 2.51 million barrels, increased 1,241,700 barrels; Cushing crude oil inventories increased by 378.30 million barrels, an increase for two consecutive weeks, the largest increase since 2009, expected to increase by 2,787,800 barrels; in addition, as of December 2, the EIA refinery equipment utilization rate was 90.40 %, slightly less than the expected value of 90.54%.

At the same time, the EIA inventory report showed that US domestic crude oil production fell by 0.2 million barrels to 8.697 million barrels per day last week, ending the three-week growth trend, maintaining a level of 9 million barrels per day for 35 consecutive weeks; Commercial crude oil inventories decreased by 2.389 million barrels to 485.8 million barrels, a decrease of 0.5%; commercial crude oil except strategic reserves last week imported 8.303 million barrels per day, an increase of 755,000 barrels per day from the previous week; the average supply of US crude oil products around the week was 19.516 million barrels per day, down 1% from the same period last year.

The well-known financial zero-hedging commentary commented that the previously announced US API Cushing crude oil inventories recorded the largest increase since 2008 and the market's suspicion of the OPEC agreement caused oil prices to fall. The latest US EIA crude oil inventories fell more than expected last week. At the same time, Cushing crude oil inventories recorded the largest increase of 3.78 million barrels since 2008. The increase in gasoline inventories and refined oil inventories exceeded expectations, while US domestic crude oil production declined slightly.

In addition, the EIA data also showed that US imports of crude oil from Saudi Arabia fell by 268,000 barrels per day to 685,000 barrels per day last week, while total US crude oil imports increased by 110,000 barrels per day to 10.61 million barrels per day. Imports from Nigeria's crude oil fell by 327,000 barrels per day to 69,000 barrels per day, while imports from Kuwait increased by 97,000 barrels per day to 269,000 barrels per day.

From the perspective of market linkage, the US dollar bond index fell slightly on Wednesday , which was suppressed by the US bond yield. Before the ECB's resolution and the Fed's resolution were announced, there were fewer market speculations and the trading sentiment was cautious. Although the US dollar index has temporarily fallen, market analysts are still optimistic about the medium-term prospects. Some analysts pointed out that the current constructive outlook of the United States remains unchanged and supports the Fed’s further tightening expectations. With the support of the more relaxed fiscal policy of US President Trump, the firm momentum of the US money market is expected to continue. On the other hand, for the foreseeable future, the monetary policy outlook of other G10 central banks is still in a relatively stable easing, which strengthens the probability of a stronger dollar.

From a geo-relationship, the US State Department Energy Special Envoy said on Thursday that Trump may approve the Keystone pipeline, but the pipeline may not be built.

According to Reuters on Wednesday, the armed forces occupied the town of Benjabad in Libya, which is close to the eastern oil port. This move may affect the supply of crude oil in Libya.

In addition, according to FX678 citing the Palestinian WAFA News Agency, the next meeting on the Middle East peace plan will be held on December 21.

In anticipation of the market, Citigroup said that WTI crude oil fell below the $50/barrel mark, as the latest EIA report showed that Cushing crude oil inventories last week hit the largest increase in 2009. In addition, the premium of Brent crude oil to WTI crude oil expanded to $2.06 per barrel, inhibiting US crude oil imports and encouraging crude oil exports. Officials who understand the situation said that OPEC is willing to accept a natural decline in crude oil production in non-OPEC oil producing countries, rather than deliberately reducing production from current levels, thus reaching a production reduction agreement.

Blanch, head of commodity research at Bank of America Merrill Lynch, said the dollar is the biggest risk to oil prices. The OPEC production reduction agreement will be complied with and there will be a supply gap in the oil market. The agreement is significant because it is the first time that OPEC and non-OPEC countries have been united since 1998. OPEC was able to reach an agreement because "Saudi wants and needs the agreement." The crude oil supply gap for 2017 is expected to be 500,000 barrels per day.

Gordon Kwan and other Nomura analysts said in a research report on Wednesday that Brent crude oil is expected to rise to $60/barrel in 2017 and to $70/barrel in 2018. As OPEC production cuts take effect from January, oil prices may continue to rise next year. If OPEC strictly enforces the target of 32.5 million barrels per day, and the US shale oil production continues to be disappointing due to logistics problems in oilfield production recovery, oil prices may be stronger than Nomura's forecast of $60. Saudi Arabia is willing to cut production, and it has split its strategy with its previous market share maximization. This will help oil prices bottom at $50/barrel next year.

Huitong Finance Yihuitong market software shows that WTI crude oil reported $49.91/barrel at 10:10 Beijing time and Brent crude oil reported $53.15/barrel.