The impact of crude oil prices on the global economy cannot be ignored. Since the international crude oil futures price hit a new low in April 2020, international oil prices have continued to rise, with a year-on-year increase of more than 85%.
As of the close of June 24, the price of light crude oil futures for August delivery on the New York Mercantile Exchange closed at US$73.30 per barrel; the price of London Brent crude oil futures for August delivery closed at US$75.56 per barrel. On June 24, 2020, the price of light crude oil futures for August delivery on the New York Mercantile Exchange was US$38.01, an increase of 87% in one year; the price of London Brent crude oil futures for August delivery was US$40.31, an increase of 93% in one year.
Why do crude oil prices continue to rise?
As a commodity, it is normal for crude oil prices to rise and fall. But such a sharp rise is rare in history.
Regarding the reason for the increase, Lin Boqiang, Dean of the China Energy Policy Research Institute of Xiamen University, said in an interview with Sino-Singapore Jingwei Client: “In fact, the main reason is the economic rebound. International oil prices have fallen a lot in 2020, and the global economy rebounded this year. The market expectation is affirmative. It will be better.”
Han Zhengji, a crude oil analyst at Jinlianchuang, believes that the current rise in oil prices is mainly supported by four factors: First, OPEC expects limited increases in U.S. crude oil production, which will enable OPEC to increase shale oil production in the short term before strong growth in shale oil production in 2022. Have greater power to manage the market. Second, the suspension of negotiations on the Iranian nuclear agreement once again provided strong support for oil prices. Third, the market’s optimistic expectations for demand. Fourth, data shows that crude oil and gasoline inventories have fallen sharply.
In addition, Lin Boqiang believes that speculation also plays a very important role in this. “Under normal circumstances, investment opportunities amplify the fluctuations in oil prices, so that when oil prices rise, the increase exceeds the increase caused by demand, and when it falls, it will exceed the decrease caused by actual demand. But in terms of production capacity, the current crude oil supply should be There is no shortage, because countries such as Saudi Arabia are still restricting production.”
What is the future trend of oil prices?
Regarding the trend of crude oil prices for a period of time in the future, Longzhong Information analyst Liu Hongxiang said: “From the supply side, Russia and other OPEC+ countries will consider increasing production when the global crude oil market is tight, which may limit the increase in oil prices. Demand. From the end point of view, the rapid recovery of global oil demand, the rebound of road and air travel in Europe and North America, and the easing of investor concerns about the early return of Iranian crude oil all support the rise in oil prices.”
Lin Boqiang believes that if nothing goes wrong, around 70 US dollars should be a basically stable price. The specific increase depends mainly on factors such as demand and geopolitics. If the demand is good and the geopolitics are tense, it may continue to rise. Otherwise, it may oscillate around 70.
It is worth noting that next week (July 1) the ministerial meeting between OPEC and non-OPEC oil-producing countries will be held, which may play a key role in the future direction of oil prices.
Judging from public information, India has repeatedly called for the restoration of suspended oil production capacity. Russia also said before that it would consider proposing to increase production at the meeting. Saudi Arabia is cautious about increasing production.
Han Zhengji predicts that before the meeting, market sentiment will be influenced, and international oil prices will remain volatile in the short term.
What is the impact of rising oil prices on China?
China is a big oil importer. In recent years, with the expansion of demand, the import volume has been rising. According to data from the General Administration of Customs, China imported 540 million tons of crude oil in 2020, 506 million tons of crude oil in 2019, and 462 million tons of crude oil in 2018.
Therefore, after the oil price rises, the cost of China’s crude oil imports will undoubtedly increase greatly. Lin Boqiang analyzed: “The increase in oil prices should have little effect on China’s oil imports, mainly due to increased costs. It will cost dozens of dollars more to buy a barrel of oil compared to 2020.”
In addition, since the price formation mechanism of domestic refined oil is linked with international oil prices, rising international oil prices will also drive up domestic refined oil prices.
Since the beginning of this year, there have been eleven rounds of domestic refined oil price adjustments, “eight ups, one down and two stranded”. The retail price of gasoline has been increased by 1,180 RMB/ton, and the diesel has been increased by 1,140 RMB/ton.