Crude oil bounces back rather than reverse

At present, international crude oil prices have rebounded
from overfall.
The fact that the global crude oil supply is gradually oversupplied has not changed, and the rise in oil prices has only rebounded
.

OPEC maintained its production increase policy

OPEC's December monthly report estimates that global crude oil demand in 2022 will be 100.
79 million b/d, non-OPEC crude oil supply on the supply side will be 66.
67 million b/d, and OPEC's unconventional oil and gas and liquefied natural gas supply will be 5.
27 million b/d, so OPEC's supply of 28.
85 million b/d of global crude oil can achieve a balance between
supply and demand.
OPEC's crude oil production in November was 27.
72 million b/d, and if OPEC maintains its current crude production, global crude oil supply will be slightly tight.

However, with the sharp recovery of international crude oil prices, OPEC does not need to reduce production to support prices, so it began to gradually reduce the scale of
production cuts.
The data shows that OPEC still had 5.
8 million b/d of production cuts in August 2021 after multiple cuts, so OPEC decided to increase production by 400,000 b/d from August 2021 until crude oil production fully returns to the level before the May 2020 cut
.
At the end of November, OPEC had 3.
2 million b/d of capacity that had not recovered, and if this capacity is fully released in the first half of next year, OPEC expects a global oversupply of 2.
07 million b/d
.

There is still room for supply to rise

First, in addition to OPEC's own recovery of production capacity, Iran also has potential production increase expectations
.
Recently, the US-Iran nuclear negotiations have once again reached a deadlock, which has greatly reduced the probability of Iran's short-term release of crude oil production, which is an important reason for the recent rebound in
international crude oil prices.
However, the United States and Iran are still in consultations, and the possibility of
substantive progress in negotiations next year cannot be ruled out.

Second, in order to suppress the rise in oil prices, the United States began to launch the strategic crude oil inventory release plan, although there will be no major changes to the global crude oil supply and demand pattern, but in a short period of time will increase the supply of crude oil, thereby curbing oil prices
.

Third, U.
S.
commercial crude oil inventories stopped falling and recovered
.
As global crude oil supply increased, the sharp decline in US crude oil inventories eased
.
U.
S.
commercial crude oil inventories stood at 428.
286 million barrels in the week ended Dec.
10, up 14.
322 million barrels or 3.
43% from their Sept.
17 lows; Commercial gasoline inventories were 218.
585 million barrels, down 3.
031 million barrels, or 1.
39%, from September 17: distillate inventories were 123.
758 million barrels, down 5.
585 million barrels, or 4.
23%,
from Sept.
17.
Rising crude oil inventories further increase the potential supply in the
market.

Demand expectations have been falsified

International crude oil demand is still expected to decline significantly
.
First, affected by the Omicron strain and the arrival of winter, the new crown pneumonia epidemic has once again shown signs of
rebound.
As of December 14, there were 644565 new confirmed cases of new coronary pneumonia in the world on that day, an increase of 353416 cases from the stage low on October 17, an increase of 121.
39%.

The rebound of the epidemic has led to countries strengthening prevention and control measures, some countries canceled flights, and China began to encourage local New Year celebrations, which led to a decline
in demand for jet fuel and gasoline.
Second, the market expects that due to the La Niña phenomenon, there will be cold winter weather in North America and Europe this year, and the demand for heating oil will rise
.
However, the current weather conditions in Europe and the United States are normal, and the expectation of increased demand for heating oil has been disappointed
.

Based on the above judgment, we believe that the previous OPEC production increase, the impact of the Omicron strain on consumption and the release of the US strategic crude oil inventory have been basically digested by the market, stimulated by the unsatisfactory progress of the US-Iran nuclear negotiations, oil prices have rebounded from over-falling recently
.