Finance Association, April 2 (Editor: Xiaoxiang) As commodity prices such as gold and cocoa continue to reach new highs since the beginning of the year, speculations about whether “commercial beef” will start this year have continued to emerge over the past few weeks. Now, the spring breeze of rising prices seems to have gradually begun to blow towards crude oil known as the “King of Commodities”!

On Monday, US WTI crude oil futures closed up 0.99% to 83.93 US dollars/barrel; Brent crude oil futures closed up 0.93% to 87.81 US dollars/barrel. Both recorded the highest closing prices since October 27 last year. However, many crude oil market traders are obviously not surprised by the “good start” that oil prices achieved overnight in April, because the current favorable factors in the crude oil market are really “too many”...

In fact, even if you simply review the major events that happened overnight in the global energy sector and macroeconomic news, one can easily list at least three points that are conducive to rising oil prices: Iran's consulate in Syria was bombed by Israel, Mexico plans to restrict crude oil exports, and the US manufacturing PMI is back in the expansion range...

However, this does not cover a series of factors that may help drive higher oil prices in the past and for some time to come, such as the continuous attacks on Russian refineries, the US will resume energy sanctions against Venezuela, OPEC+ is expected to maintain production restrictions this week, and hedge funds have begun to actively increase crude oil holdings!

The above factors, each of which are listed separately, may be enough to trigger a short-term rise in the global energy market, and the simultaneous emergence of so many favorable factors may also be enough to indicate one thing: at least judging from the news, it seems that the current oil market is “difficult even if it doesn't rise”...

The following is a detailed introduction to the seven major news stories in the oil market mentioned above:

① Iran's consulate in Syria bombed

According to Iran's state television, the Islamic Revolutionary Guard Corps public relations department said on April 1, local time, that Israel's air strike on the consular office building of the Iranian Embassy in Syria that day killed 7 Iranian military personnel, including Mohammed Reza Zahdi, commander of the Islamic Revolutionary Guard Corps of Iran's “Al-Quds Brigade” and Mohammed Hadi Haji Rahimi.

This is a sign that the Middle East conflict is once again escalating. Affected by this news, international oil prices surged in the short term overnight.

Some industry insiders worry that Iran may now also fight back against Israeli embassies and consulates abroad, which will trigger an even more worrying and unpredictable escalation of the situation in the Middle East.

Iranian Foreign Ministry spokesman Kanani strongly condemned Israel's attack on the consular office building of the Iranian Embassy in Syria. He said that the attack was a serious violation of international law, particularly the Vienna Convention on Diplomatic Relations. Israel's act should be condemned in the strongest terms by the international community and the United Nations, and warned that Iran would reserve the right to take equal action against Israel.

② Mexico plans to restrict crude oil exports

Mexico's state-owned oil company is currently planning to stop exporting some crude oil within the next few months. This move is likely to further reduce oil supply to the global market.

According to people familiar with the matter, Pemex has cancelled contracts to supply its flagship Maya crude oil to refineries in the US, Europe, and Asia. At a time when OPEC+ is likely to continue to cut production, Mexico's export cuts this time may further push up oil prices, which have been high for six months.

People familiar with the matter mentioned above said that the plan of CNPC to suspend some exports is to increase domestic gasoline and diesel production before the country's presidential election on June 2. Mexico's current President López's term is coming to an end, and he has promised to rid the country of expensive imported fuels. People familiar with the matter said that the plan to suspend some exports mainly affects exports of Maya crude oil, while exports of other grades, including moderately acidic Isthmus, should continue to decline.

③ The US manufacturing PMI returns to the expansion range

US manufacturing activity expanded for the first time since September 2022 in March, thanks to a sharp rebound in production and strong demand, according to data released by the American Institute for Supply Management (ISM) on Monday.

The US ISM manufacturing PMI index rose 2.5 points to 50.3 in March. Although it has only just crossed the 50-year dividing line, it is still quite monumental for the US manufacturing industry — this figure ended the previous 16 months of continuous contraction. ISM Manufacturing Business Research Committee Chairman Timothy Fiore said in a statement, “American demand is still in the early stages of recovery, and there are clear signs of improvement.”

It is worth mentioning that before the US manufacturing data mentioned above was released, the two major manufacturing PMI indicators of China, the world's largest importer of crude oil, also exceeded expectations. In March, the Caixin China manufacturing purchasing managers' index reached 51.1, a 13-month high; in March, the official manufacturing purchasing managers' index rose to 50.8, all rising further in the expansion range.

The impressive performance of manufacturing data from the two major crude oil consumers in China and the US has undoubtedly also given people more confidence in the demand-side situation in the global crude oil market.

④ Russian refineries continue to be attacked

In an exclusive interview with the media last week, Ukrainian President Zelensky said that since Ukraine lacks anti-aircraft weapons to protect its energy and other infrastructure from being attacked by Russia, it is only possible to attack Russian energy facilities to make the other party “pay the price.” This also indicates that Ukraine's attacks on Russian energy facilities will probably not stop immediately.

However, several recent data sets have shown that Ukraine's attack on Russian refineries has had a major impact on the Russian energy market. According to media reports on Monday, Russia has planned to reduce the daily diesel export volume from major western ports to the lowest level in nearly five months in April, drastically reducing crude oil processing rates due to previous Ukrainian drone attacks on refineries and seasonal maintenance.

According to sources, the US government has told Ukraine several times before, calling for it to stop attacking Russian energy facilities because the US side is concerned that such attacks by Ukraine will push up international energy prices, which is not conducive to US President Joseph Biden's re-election campaign this year. When asked if US officials had warned against such attacks on Russian energy facilities, as rumored in Washington, Zelensky confirmed, “The US has not responded positively to this, but Washington cannot restrict Ukraine from using weapons of its own manufacture. We used our own drones. No one can tell us you can't do this”.

⑤ The US will resume energy sanctions against Venezuela

On January 30 of this year, the US State Department issued a statement stating that it has decided not to renew General License No. 44 for Venezuela, and that it will not authorize US companies to trade with the Venezuelan oil or gas industry after April 18.

As trade restrictions on Venezuela will be re-enforced this month, this also indicates that the country's crude oil exports, which have been improving over time, will once again fall into “darkness.” According to reports, some Indian refiners have now stopped purchasing from Venezuela because the US sanctions exemption will expire in mid-April.

According to a report released by OPEC earlier last month, Venezuela's crude oil production increased for the third consecutive month in February. The report shows that according to secondary source data, Venezuela's crude oil production reached 820,000 barrels per day in February this year, compared with 804,000 barrels in January and 782,000 barrels in December 2023.

⑥ OPEC+ is expected to maintain production restrictions this week

In January of this year, OPEC, Russia, and other allies jointly implemented new production reduction measures. Countries promised to continue production reduction policies until the end of June. Last month, oil producers agreed to maintain production reduction measures.

On Wednesday, OPEC and the Ministerial Supervisory Committee of non-OPEC oil producers held a meeting to evaluate market conditions and member countries' production. However, the market currently expects that OPEC+ will not recommend any policy adjustments until the next meeting on June 1.

Investors can keep an eye on the results of the conference to keep abreast of the latest developments in the oil market. According to shipping data and a survey recently released by industry sources, OPEC oil production reached 26.42 million b/d in March, down 50,000 barrels from February, reflecting a decrease in exports from Iraq and Nigeria. Currently, some member states are implementing voluntary production reduction agreements reached with the OPEC+ Alliance.

⑦ Hedge funds actively increase crude oil positions

Long positions on Brent crude also rose to their highest point in more than a year last week, according to ICE data. According to Bridgeton Research Group (Bridgeton Research Group) data, the proportion of trend followers currently net long on Brent crude oil has reached the highest level in history.

In fact, as we explained last week, there are signs that institutional investors are currently buying oil at the fastest rate in more than four years because they are optimistic that Saudi Arabia and its OPEC+ allies will continue to maintain production restrictions while improving economic prospects will boost energy consumption. In the week ending March 19, hedge funds and other fund managers made net purchases equivalent to 140 million barrels of oil in the six most important futures and options contracts linked to oil prices.

This is the fastest week of net purchases since December 2019, and it is also enough to rank in the top ten of the list of largest net purchases in a single week since records began in 2013.

Editor/Somer