Crude oil trading reminder: OPEC+ may increase production beyond expectations. Is there still a chance for oil prices to rise?

During the Asian session on Monday (October 4), US crude oil fell slightly. Last Friday (October 1), oil prices rose slightly, helped by the tight supply caused by OPEC+ alliance supply restrictions. In addition, the slight increase in US consumer confidence and the California oil spill also contributed to the rise in oil prices, but OPEC+ is about to hold a meeting , The market is worried about OPEC+'s substantial increase in production, which limits the increase in oil prices.

In the day, we will focus on the 21st OPEC+ Ministerial Conference.

Fundamentals are bullish

[Accident in California offshore operations: 120,000 gallons of crude oil leaked, some of which have reached the coast]

A large-scale crude oil spill occurred in the waters of Orange County, California. Local officials said that some of the crude oil had reached the city coast and the local beaches had been urgently closed.

According to the American Broadcasting Corporation (ABC), the mayor of Huntington Beach, Orange County, King Carr, said that 3,000 barrels of oil were leaked during offshore oil production operations , which is equivalent to approximately 126,000 gallons (approximately 470,000 liters).

[The U.S. dollar fell for the second day in a row]

The U.S. dollar fell for the second consecutive trading day on Friday, following the decline in U.S. Treasury yields, as investors took profits after the recent surge, but the decline was considered temporary.

(Daily chart of the US dollar index)

Concerns about the new crown epidemic, unstable economic growth, and the deadlock in Washington before the deadline to raise the US government’s borrowing ceiling have led to cautious market sentiment, which has also provided support for the US dollar, which is regarded as a safe-haven asset, and combated the decline in gold prices.

Marc Chandler, chief market strategist at Bannockburn Global Forex, said: "The more hawkish stance seems to be the key factor that pushed the dollar higher at the end of September."

He added: "However, the current focus is on fiscal policy, although investors seem to have seen it through, because many people think that US debt default is unthinkable."

[U.S. consumer confidence rose slightly at the end of September]

The US consumer confidence index rose slightly at the end of September, but it was still close to the low point since the outbreak, and Americans' optimism about the economic situation has slightly increased.

Data released on Friday showed that the University of Michigan consumer confidence index rose to 72.8 from an initial value of 71, exceeding the median expected by survey economists, which was 70.3 in August .

Richard Curtin, who is in charge of the investigation, said in a statement, “Consumer confidence rose slightly at the end of September, but overall optimism was still suppressed, initially affected by the spread of the delta strain, and later due to the soaring inflation rate and poor long-term economic prospects. ".

The slight rebound in consumer confidence suggests that as new cases in most states decline, worries about Delta are beginning to weaken. Although high prices and continued health concerns still weigh on consumer confidence, overall consumer spending remains high.

[Iranian Foreign Minister: The United States should release at least US$10 billion in frozen funds before resuming nuclear negotiations]

Iran told the United States that if it wants Tehran to resume nuclear negotiations, the United States should lift the freeze on at least $10 billion in funding. This demand may become a new obstacle for major powers to resume the 2015 nuclear agreement .

In an interview with Iran’s National Television, Iran’s Minister of Foreign Affairs Hossein Amirabdollahian stated that at the recent UN General Assembly, the Biden administration tried to contact his team on the resumption of nuclear negotiations through various channels.

He said that his reply through an intermediary was, "If Biden is serious, then tell Biden that he should send a serious signal to Iran, that is, release at least US$10 billion of our frozen funds." He added that Britain, France and Germany should also make the proposal.

The United States has not yet formally commented on this request, and it is not clear whether this is a rigid condition for the resumption of negotiations. International sanctions against Iran still exist, and the country’s crude oil is not allowed to enter the market.

[JPMorgan Chase estimates that crude oil will rise to $84 at the end of the year]

JPMorgan Chase said on Friday that the deteriorating natural gas purchase crisis in Asia and Europe will prompt more generators and other machinery to switch to more oil and fuel, and increase crude oil demand. It is estimated that crude oil prices will reach 84 per barrel by the end of this year. Dollar.

This update is 7.7% higher than the original estimated target price. JPMorgan Chase analysts Natasha Kaneva and Gregory Shearer said that crude oil prices may rise even higher.

Due to the gradual restart of the economies of the United States, Europe and other large economies this year, and the low supply of crude oil, Brent crude oil futures have soared by more than 50% this year. The price of Brent crude oil on Friday was close to $79 a barrel.

JPMorgan Chase analysts said that natural gas is currently very expensive in some places, and the switch to fossil fuels in these areas is expected to increase the daily demand for crude oil by more than 900,000 barrels .

Fundamentals are bad

[Citi: OPEC+ may increase production scale by more than twice the previous estimate]

Citigroup Ed Morse and other analysts predict in a research report that OPEC+ may increase production at Monday's meeting, and the scale may exceed its original target of 400,000 barrels per month.

After the price of Brent oil rose above US$80 per barrel, the increase in production in November may double to 800,000 barrels per day or more .

OPEC+ has sufficient spare capacity to double the rate of production increase before the end of the year, and OPEC+'s increase in production still lags behind the demand recovery.

Asia's full-scale procurement of all fuels in the next month or so will likely cause further tightening of the market.

In general, oil prices have fluctuated at high levels in the short-term, but the continued energy crisis still has opportunities for oil prices to rise further. The OPEC+ ministerial meeting needs to be paid attention to in the future, which may cause a major blow to oil prices.

(U.S. crude oil daily chart)

At 10:38 GMT+8, U.S. crude oil was quoted at $75.62 per barrel.