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As one of the most largely used commodity in the world, petroleum related products such as crude oil and fuel are used for daily tasks including as fuels, heating oils and feedstocks to make products such as plastics, polyurethane, solvents, and hundreds of other intermediate and end-user goods.
In 2022 alone, the United States consumed an average of about 20.28 million barrels of petroleum per day. As a popular product, crude palm oil futures are traded in most exchanges such as Asia Pacific Exchange (APEX), Bursa Malaysia Derivatives Berhad (MDEX), Shanghai International Energy Exchange (INE Shanghai), ICE Futures Europe (IPE) and other exchanges.
In addition to the popularity of the product, a recent series of events have affected the prices of all oil products. Hence, this article will present specialised research by Orient Futures Shanghai as well as updates regarding the product.
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Crude Oil Updates
OPEC+ Decision to Reduce Oil Production in April 2023
On 2 April 2023, OPEC+ announced it would have oil production cut by 1.66 million barrels per day, causing oil prices to rise sharply.
According to our analyst at Shanghai Orient Research Institute, this move indicates that oil-producing countries are now more worried about the outbreak of potential risks in the financial market in the future and the continued downward pressure on the economy that may lead to further declines in oil prices.
Following the announcement in April, crude Oil prices have raised to above $87 per barrel since the announcement by OPEC+ in the days followed.
OPEC+ New Oil Output Agreement
According to a report by Reuters, OPEC+ reached a consensus on a new oil output agreement on 4 June 2023. As part of this agreement, Saudi Arabia will implement a significant reduction in its oil production which would be extended to August. This is in addition to the broader OPEC+ deal aimed at limiting the global oil supply until 2024. The objective behind these measures is to bolster declining trading crude oil prices.
Saudi Arabia experienced a moderate rebound in its crude oil exports in June, with an increase of approximately 150,000 barrels per day. Preliminary data suggests that export levels are expected to remain stable in July. On the other hand, Russia witnessed a decline in its seaborne crude oil exports, amounting to a reduction of 470,000 barrels per day in June. Additionally, refined oil exports from Russia also experienced a slight decrease compared to the previous month.
Apart from extending the existing OPEC+ cuts of 3.66 million barrels per day (bpd), the group collectively decided to lower the overall production targets from January 2024 by an additional 1.4 million bpd. This adjustment leads to a combined output target of 40.46 million bpd.
Crude Oil Prices
Based on the Orient Futures Weekly Updates Report on the Fundamental Data of Energy Product Oil on 10th July 2023, Crude oil prices have rebounded moderately. The impact of the decline in market risk appetite on oil prices has also slightly decline.
Analysts from Orient Futures Shanghai believes that crude oil prices have been pricing in the expectation of the Fed’s tightening monetary policy and the slowdown in demand growth during the first half of the year as the prices move down significantly from the high point last year.
It is anticipated that the ongoing negative effects of the macro environment on oil prices will gradually diminish as the economic downturn takes shape. The most recent inventory report by the Energy Information Administration (EIA) indicates a decrease in both crude oil inventories.
Additionally, the 4-week moving average of domestic gasoline supply in the United States has consistently risen and surpassed the levels seen during the same period last year. This suggests that gasoline consumption demonstrates strong resilience despite the challenging circumstances in the macro environment.
Although the end of Russia's domestic refinery maintenance season might result in a moderate decline in crude oil imports compared to the second quarter, the overall Russian oil supply remains resilient. The implemented supply-side adjustments aim to mitigate the risk of significant imbalances between supply and demand and are expected to support oil prices. As a result, short-term oil prices are anticipated to have some upward potential.
INE Low Sulfur Fuel Oil Prices
According to a report by Ceicdata, the Shanghai International Energy Exchange (INE) Low Sulfur Fuel Oil Futures was priced at 3,959.000 RMB/Ton on July 7, 2023. This reflects a decrease from the previous price of fuel oil of 4,004.000 RMB/Ton on July 6, 2023.
INE Low Sulfur Fuel Oil Futures Contract
As per the circular by Shanghai International Energy Exchange (INE), the adjusted trading margin rate of Low Sulfur Fuel Oil futures contracts was 12% of the contract value and the price limit will be ±10% from the settlement price of that day.
INE Notice: https://www.ine.cn/eng/circularnews/circular/129739.html
Crude Oil and Fuel Oil News
According to Reuters, Oil prices were near flat on 6 July as the market weighed tighter US crude supplies with the higher likelihood of a US interest rate hike that could dent energy demand.
Brent crude oil price settled 13 cents lower at $76.52 a barrel, after a 0.5% gain the previous day. US West Texas Intermediate crude gained 1 cent to $71.80 a barrel, after rising 2.9% in post-holiday trade on Wednesday to catch up with Brent's gains earlier in the week.
The market has been expecting interest rates in the United States and Europe to rise further to tame stubborn inflation. Fears of a global recession mounted after recent surveys showing slower factory and services activity in China and Europe.
Traders can trade Brent Crude Futures contract from Intercontinental Exchange Singapore (ICE SG) and ICE Futures Europe (IPE) through Orient Futures Singapore. The Brent Crude Futures Symbol are BM and B respectively.
Start Trading With Orient Futures Singapore
Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.
Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore (ICE SG). Starting August 2023, corporate clients can also gain access to the B3 Exchange through us.
We provide premium customer service at an affordable cost to all our clients. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.
