This week (9.5-9.11), crude oil as a whole showed a downward trend. The average price of WTI this week was $67.72 per barrel, a decrease of $4.53 per barrel or -6.27% from the previous week. The main factors that caused oil prices to be under pressure and decline during the week include the expected recovery of Libyan crude oil supply, OPEC's downward revision of energy demand prospects, and poor US economic data.

This week (9.5-9.11), crude oil as a whole showed a downward trend, with a week-on-week average price decline.

During the week, bearish factors dominated the market news. On the supply side, investors' expectations of the recovery of Libyan crude oil supply put pressure on oil prices. The various political factions in Libya reached an agreement, which is expected to end the nationwide crude oil production shutdown. According to data from the Libyan National Oil Corporation, the previous shutdown led to a 63% reduction in Libya's crude oil production, about 0.724 million barrels per day. On the demand side, the Organization of the Petroleum Exporting Countries (OPEC) has lowered its demand growth expectations for two consecutive months, and investors' concerns about the outlook for energy demand have increased downward pressure on oil prices. In its monthly report, OPEC lowered its forecast for global oil demand growth in 2024 by 0.08 million barrels to 2.03 million barrels per day, and lowered its forecast for global oil demand growth in 2025 by 0.04 million barrels to 1.74 million barrels per day. OPEC stated that due to overly optimistic expectations for global oil demand, especially in China, in the first half of this year, and poor crude oil import data from China in the past four months, it had to re-evaluate and adjust these expectations. In addition, on the economic front, data shows that US ADP employment increased by 0.099 million people in August, the smallest increase since January 2021. Data released by the US Department of Labor also showed that non-farm employment in the US increased by 0.142 million people in August, lower than the market's expected increase of 0.165 million people. The weak US job market has also heightened investors' concerns about the economic and energy demand outlook, which is bearish for oil prices.

This week, the average price of international crude oil spot prices decreased compared to the previous week. In the Middle East crude oil market, due to concerns about weak demand in Asia, Saudi Arabia has lowered the official selling price of Arab light crude oil sold to Asia for October to the lowest level in nearly three years. The official selling price of Arab light crude oil sold to Asia for October has fallen by $0.7 to a premium of $1.3 per barrel to Oman/Dubai average. Previously surveyed Asian refineries expected a downward adjustment range of $0.5-0.7 per barrel for Arab light crude oil. A source from an Asian refinery stated that the actual adjustment for Arab light crude oil was larger than expected. In addition, Qatar Energy Company has signed tenders to sell low-sulfur condensate cargoes for November, with participation from companies such as SK Energy in South Korea. However, the sales volume of low-sulfur condensate and deodorized condensate may be limited as it has to prioritize supplying condensate to domestic condensate separation towers. Qatar Energy Company also plans to partially overhaul its oil fields from October to the first half of December, so the production of condensate may temporarily decrease. Under these circumstances, a South Korean energy company mentioned that Qatar Energy Company may not privately negotiate the sale of low-sulfur condensate and deodorized condensate for loading in November. In the Asia-Pacific crude oil market, spot price differentials for Vietnamese crude oil for October loading have fallen due to weak purchasing interest. Vietnam's PV OIL opened bids for the sale of a cargo of 0.3 million barrels of Cù Né crude oil for loading from November 16th to 20th. The bid validity period is until September 17th. The current spot price differential for Cù Né crude oil for October loading has fallen to a premium of $6 per barrel to spot Brent. The transaction price for Cù Né crude oil for October loading is likely to be around a premium of $6 per barrel to spot Brent.

This week, on the supply side, the IEA believes that if OPEC+ continues to implement the plan to increase supply, the global oil market will shift from shortage to excess in the next quarter. Due to the difficulty of supply keeping up with the peak summer demand, the market has experienced shortages and global inventories have been impacted, but they should stabilize in the last quarter of this year. With the increasing possibility of a ceasefire in Gaza, some Asian countries' demand remains weak with little sign of recovery, and the recent poor state of the oil market is set to continue. If the market fundamentals cannot quickly break this bearish trend, OPEC+ may be unwilling to cancel voluntary production cuts in the short term.

On the demand side, the economic issues of major Asian countries are not optimistic, and investors have lowered their expectations for oil demand growth in these countries. Due to weak fuel demand, refineries in major Asian countries have significantly reduced their crude processing rate since July. As the world's second-largest economy, China, shifts from gasoline-powered vehicles to electric cars, the demand for oil has decreased. In addition, India's crude oil demand has also shown a slight decline, with crude oil imports in July falling slightly by 0.8% compared to the same period last year, due to seasonal rainfall restricting transportation, and most refineries preparing for planned maintenance work.

The operating rate of US refineries has decreased, net crude oil imports have increased, and commercial crude oil inventories have risen, while US gasoline and distillate oils have also increased. Data from the US Energy Information Administration shows that as of the week ending September 6, 2024, crude oil inventories are 0.34% lower than the same period last year; 4% lower than the same period over the past five years; gasoline inventories are 0.57% higher than the same period last year; 1% lower than the same period over the past five years; distillate oil inventories are 2.03% higher than the same period last year, and 8% lower than the same period over the past five years. In addition, last week, the average daily crude oil imports to the US increased by 1.075 million barrels to 6.867 million barrels compared to the previous week, and the daily gasoline imports of finished products increased by 0.165 million barrels to 197.6 million barrels compared to the previous week.

Speculators in the light crude oil futures on the New York Mercantile Exchange reduced their net long positions by 21.9%. According to the latest statistics from the US Commodity Futures Trading Commission, as of the week ending September 3, total open interest, long positions, and net long positions in WTI crude oil futures all declined, while short positions saw a significant rebound. Total open interest fell by 0.9% compared to the previous period, long positions fell by 3.7%, short positions increased by 50.2%, and net long positions declined by 21.9%. As a result, the long-short ratio for WTI accelerated its decline to 2.53, a decrease of 1.42 or -35.87% compared to the previous period.

This week, due to concerns about the global economy and weak oil demand intensifying, it has triggered a rapid withdrawal of funds, and the total open positions of WTI crude oil futures have continued to shrink for four weeks. Looking at the funding situation on the market, in addition to economic and demand concerns, OPEC+ plans to increase oil production starting in October, and the poor performance of the US economic data has led to a significant increase in short positions, with a weekly increase hitting a rare historical high. Looking at the performance of oil prices, WTI crude oil futures prices continue to plummet, eventually falling to around $70/barrel. Looking ahead, the pessimistic sentiment in the crude oil market is still intensifying in the short term, so the pressure on the oil market remains. Faced with rapidly weakening oil prices, OPEC+ has had to postpone the one-month implementation of the plan to increase oil production, but this move has a very limited boost effect on the oil market.

On the technical chart, WTI crude oil futures prices oscillated and fell during the week. The main factors boosting oil prices during the week were: firstly, hurricanes partially disrupted energy production in the Gulf of Mexico; secondly, the EIA raised its global oil demand forecast for 2024; thirdly, the number of active oil and gas drilling rigs in the US decreased for the fourth consecutive week; and fourthly, 8 oil-producing countries have voluntarily extended production cuts until the end of November. The main factors suppressing oil prices during the week were: firstly, EIA crude oil, gasoline, and distillate inventories increased across the board; secondly, OPEC lowered energy demand forecasts for two consecutive months; thirdly, lower-than-expected US economic data triggered economic concerns; fourthly, Saudi Arabia lowered its official crude oil selling price; and fifthly, investors' concerns about the economic and energy demand outlooks remained unabated. As of the 11th, WTI closed at $67.31/barrel, down $1.89/barrel or -2.73% compared to the previous period; for the week ending the 11th, the weekly average price of WTI was $67.72/barrel, down $4.53/barrel or -6.27% compared to the previous period. From a technical perspective, the downward momentum of oil prices continues to increase.

On the economic front this week, in the US, the market believes that even if the Federal Reserve begins to cut interest rates, the high borrowing costs caused by high interest rates will continue to affect the US economy for some time, further impeding its development. At the same time, the future direction of the Federal Reserve's monetary policy brings great uncertainty to global financial markets and economic development. Federal Reserve Chairman Powell pointed out that inflation has already decreased, the labor market is no longer overheated, and he is more confident that the inflation rate will continue to gradually return to the 2% target. In order to address inflation, the Federal Reserve has raised interest rates 11 times in a row from March 2022 to July 2023, with a cumulative increase of 525 basis points, bringing the federal funds target rate to its highest level in 23 years.

This week, on the 5th, 8 OPEC and non-OPEC oil-producing countries decided to extend the voluntary production cut measures, originally scheduled to expire at the end of this month, to the end of November. Beginning in early December, they will gradually withdraw this part of the production cut monthly, but will flexibly adjust the pace of reducing production cuts based on market conditions. Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria, and Oman, the 8 "OPEC+" member countries, made the decision during an online meeting.

Although Russian refineries are expected to start seasonal maintenance, the country's oil exports through Western ports in September will increase to 1.98 million barrels per day, an increase of 0.03 million barrels per day compared to the previous period. Russia needs to supply enough oil to the domestic market to meet the demand for automotive fuel. However, local refineries will traditionally undergo large-scale seasonal maintenance and reduce operations, leading to an increase in oil supplies for export. Calculations show that the average daily oil exports from Primorsk, Ust-Luga, and Novorossiisk in Russia in September will increase by only 1.5% compared to the previous period.

Saudi Aramco has lowered the official selling price of its Arab Light crude oil in Asia by 70 cents/barrel, to be $1.30/barrel higher than the regional benchmark per barrel; it has reduced the price of crude oil sold to Northwest Europe by about 80 cents/barrel, and the price of crude oil sold to North America by 10 cents/barrel. The reason for the price cut is due to growing concerns about weakened demand, as well as a decline in Asian refining margins limiting Saudi Aramco's ability to raise prices.

Jinlianchuang predicts that in the next week (9.12-9.18), OPEC's monthly report will continue to lower global crude oil demand expectations for the second month in a row, which is undoubtedly a further blow to the already negative oil market. Although the EIA's monthly report is relatively optimistic about oil demand expectations, it is still in a negative growth state in terms of China's crude oil import demand, making it difficult to effectively boost the oil market. Overall, the crude oil market is still in a weak phase, and international oil prices may fluctuate slightly in the short term.

For market institutions or investors, they can pay attention to crude oil futures to participate in the crude oil market. Assuming that a certain futures institution wants to adopt an intertemporal arbitrage scheme for market transactions, the institution can formulate trading strategies based on the current market situation. If the current crude oil prices are generally declining and the price changes are large, investors can profit from one-sided trading. However, as prices hit bottom, there will be risks in one-sided trading. At this time, adopting the trading method of spread arbitrage can effectively hedge the risk of one-sided trading. If the contango structure shows that the WTI crude oil futures price spread between the near and far months further narrows, and the market sentiment in the near term has fallen back somewhat, investors can hedge their positions by selling near-term contracts and buying far-term contracts. The profitability of this hedged trading will depend on the change in the price spread. If the current price spread continues to narrow, this intertemporal arbitrage trading can still maintain positive returns.

The data, opinions and forecasts in this report reflect the personal judgement of the author on the day of the initial release of the report. They are based on information that the author believes to be reliable and publicly available, but the accuracy and completeness of this information are not guaranteed. The author also does not guarantee that his/her views or statements in the report will not change. In different periods, the author may issue a report inconsistent with the data, opinions and predictions of this report without notifying anyone. The information or opinions expressed in the report do not constitute investment advice for anyone, and the cases listed in this report are for demonstration purposes only. The author is not responsible for any losses incurred by anyone using the content of this report.

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