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The Gap between British and American Crude Oil Prices will Narrow
During the Spring Festival holiday, international oil prices surged and fell. In addition to technical factors, the Brent oil price calculation reform plan triggered controversy among all parties and also impacted the crude oil market. Market participants believe that the reform will not affect the final trend of oil prices, but will narrow the price gap between the two places. In the future, oil prices will mainly rise slowly.On February 18, London North Sea Brent crude oil futures on the Intercontinental Exchange (ICE) fell slightly by 0.24% to close at $117.38 per barrel. The New York crude oil futures market was closed for U.S. Presidents' Day, and electronic trading fell slightly after a narrow range.
Since entering 2013, the two major benchmark oil prices have maintained a volatile upward trend. New York oil prices mainly reflect the market performance of North America. In contrast, Brent oil prices are more closely linked to factors such as global geopolitics.
Platts, the price compiler for the Brent crude market, announced on Monday that it would change the way it calculates the price of the global oil benchmark, causing shock in the industry.
Because oil production in the North Sea has fallen by two-thirds from 6 million barrels per day at the turn of the century, the sharp reduction in production has made the Brent spot price on this basis vulnerable to disruption and manipulation, damaging Brent. The credibility of oil prices. The Brent crude oil spot market is the basis for Brent crude oil futures prices.
Brent crude oil is mainly produced in the Brent region of the North Atlantic and North Sea. Currently, the Brent crude oil futures of the Intercontinental Exchange include Forties, Oseberg and Ekofisk crude oil to form the Brent Benchmark Crude Oil (BFOE). Platts proposed the introduction of a premium system for crude oil of different qualities, planning to set premiums for Oseberg and Ekofisk crude oil. This conflicts with Shell's previous plan to set a premium for Oseberg, Ekofisk and Brent crude oil. Differences in plans between Shell and Platts could lead to a split in the way Brent oil prices are calculated, harming its availability in the market.
Shanghai mid-term futures analyst Li Zhoulei said in an interview with a reporter from International Finance News: "The main purpose of adjusting the Brent crude oil spot market price calculation formula is to get rid of the impact of the declining Brent oil field production on oil prices, making Brent Crude oil prices are more well-structured, and doing so may result in a narrowing of the spread between Brent crude futures prices and New York crude oil futures prices.”
Goldman Sachs predicts that the average price difference between New York crude oil and Brent crude oil futures is expected to narrow to about US$7.5 per barrel in 2013, while the current price difference is about US$21.
Although the price difference between crude oil futures in the two places will narrow, the trend of global oil prices will not be affected too much. From the perspective of institutions, due to the clear economic recovery trend, the foundation of international oil prices this year is better than that of 2012.
During the Spring Festival holiday, monthly reports released by the U.S. Energy Information Administration (EIA), the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) were released one after another. Among them, the EIA and OPEC both raised their forecasts for global crude oil demand in 2013, respectively. Daily demand increased by 100,000 barrels and 80,000 barrels. At the same time, the EIA also lowered its non-OPEC crude oil production forecast.
Li Zhoulei believes that the EIA mentioned in the report the boosting effect of China's economic recovery since the third quarter of last year on the growth of crude oil demand. Some economic data in China have indeed sent positive signals to the market. The stabilization and recovery of China's economy has promoted the strong rise in oil prices since the beginning of this year. At the same time, the U.S. domestic economy has shaken off the negative impact of the financial crisis, and the New York stock index is only one step away from a record high, indicating that investors are optimistic about the U.S. economy. Overall, the economies of both China and the United States are improving steadily, which will form an important support for oil prices.
However, some institutions have reservations about the improvement in demand. In its monthly oil market report, the IEA lowered its daily oil demand growth forecast for 2013 by 90,000 barrels. The agency warned that recent signs of recovery in global oil demand are not a sustainable rebound. The IEA singled out a surge in apparent demand in China at the end of 2012 and questioned the extent to which this growth could be seen as a sign of long-term improvement in demand.
Although institutions predict that international oil prices will still maintain an upward trend, there are still many "stumbling blocks" on the way up.
Among them, the biggest uncertainty factor is the increase in crude oil production, especially the increase in U.S. crude oil production. Goldman Sachs pointed out in the 2013 Commodity Outlook Report that economic growth will bring about an increase in demand for crude oil, but the supply of crude oil will also be greatly improved in the future. In the longer term, the fundamentals of the international crude oil market are likely to A more stable situation.
“From a supply perspective, Saudi Arabia began to significantly reduce production in December 2012, and OPEC oil supply fell again by 100,000 barrels in January this year to 30.34 million barrels per day, which to a certain extent offset the rapid growth of U.S. shale oil production. ." Li Zhoulei believes that "as long as OPEC can further control production capacity, global crude oil supply will not increase significantly. Overall, after the adjustment of oil prices in the future, they will still mainly rise slowly."
In the short term, the seasonal off-season in the crude oil market will also affect oil price trends.
Wang Yanhui, an analyst at China Merchants Futures, believes that the current global macroeconomic situation is relatively stable and the directional guidance for commodities is not strong. Oil prices are more guided by their own fundamentals. Although the snowstorm in the northeastern United States last week brought an increase in heating oil demand, the seasonal peak season is gradually coming to an end. The upcoming March is the off-season for crude oil demand, and the risk of oil price adjustment is expected If it increases, it may continue to maintain a high and volatile trend in the short term.
Wang Yanhui pointed out that there is greater pressure on oil prices in the short term. Although New York crude oil futures continue to increase positions, the upward momentum of oil prices has significantly weakened, and the improvement in supply and demand has not provided sustained support for oil prices.
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