OPEC and Russia may ease production cuts from August, and oil prices may come under pressure

Summary: according to recent sources, OPEC and Russia may ease production reduction from August, which will put pressure on future oil prices. Four OPEC + sources said that with global oil demand recovering and oil prices rebounding from lows, OPEC and Russia may loosen their previous record production reduction agreement since August. OPEC and its allies have previously agreed to cut production by 9.7 million barrels / day from May to July, equivalent to 10% of global demand. The scale of production reduction has reached an all-time high.

OPEC and Russia have yet to discuss extending the production reduction agreement until August, which means the scale of production reduction is likely to drop to 7.7 million B / D, the source said. Yesterday, API data showed that crude oil inventory decreased by 8 million barrels, Cushing inventory increased by 1.64 million barrels, gasoline decreased by 2.46 million barrels, and distillate oil increased by 2.64 million barrels. The overall data is positive, but this is the data as of last Wednesday, which does not fully reflect the impact of recent US re isolation on demand. Focus on tonight’s EIA data. In the past two days, the gross profit of rbcL gasoline in the United States rose. Today, the Middle East to Far East freight rate fell to 1.12 from 1.81 on June 22, and EFS fell to 0.59. Crude oil bottomed out and rebounded in the second quarter. Our strategic suggestions are in line with the actual trend as a whole. In the report of “expected resumption of work, rough road for crude oil rise in May” on April 30, we proposed to buy on bargain, Brent reached the target of 42 and WTI reached the target of 38. According to the report “crude oil in June may fall back in June, the center of gravity moves upward” in the report on June 2. It is suggested to buy on bargain. Brent’s first target is around 45. The actual trend basically conforms to our expectation, and the highest drop of Brent is 44.

Industry news:

1. A spokesman for the national oil company (NOC) said on Monday that the company hopes to resume oil production after international negotiations ended the blockade of troops stationed in eastern Libya; and (2) the government of national unity (GNA), headquartered in Tripoli, recently repelled the eastern based state of Libya The LNA’s 14 month offensive has regained control of most of the northwest; ③ although Libya has been in a divided state since 2015, international agreements stipulate that only national oil companies can produce and export oil, and the blockade has caused billions of dollars in revenue losses to Libya; ④ a spokesman for the national oil company said in a statement that In recent weeks, under the supervision of the United Nations, the national oil company, the GNA and the countries in the region have held talks; ⑤ the spokesman said: “we hope that the countries in the region will lift the blockade and let us resume our work.” It is understood that Turkey supports GNA, while UAE, Russia and Egypt support LNA. The blockade was imposed because Turkey’s increasing support for GNA made it impossible for LNA to maintain its attack on Tripoli; and (6) previous data showed that Libya’s crude oil production before the blockade was about 1.2 million barrels / day, but in recent months, it has been less than 100000 barrels / day due to the blockade. However, this means that once the national oil company of Libya resumes production, it may lead to another 1 million barrels / day of surplus crude oil production in the market, which will make the balance of supply and demand more difficult

2. OPEC’s oil production in June decreased by 1.25 million B / D compared with that in May; 1) according to the estimation of petro logistics, the oil production of the organization of Petroleum Exporting Countries (OPEC) in June was 1.25 million B / D lower than that in May, as the organization was trying to implement the production reduction agreements reached with Russia and other allies. ② The OPEC + alliance, formed by OPEC and its allies, has agreed to cut production by 9.7 million barrels per day from May 1 to ease the sharp drop in oil prices and demand caused by the new coronavirus crisis. OPEC’s production reduction quota in this agreement is 6.084 million barrels per day. ③ “Excluding Iran, Libya and Venezuela, the remaining 10 OPEC countries are still 1.55 million barrels / day away from full implementation of the agreement,” petro logistics said in an email. Iraq, Nigeria and Kuwait have been the main countries that have reduced supply since May, while Saudi Arabia, the United Arab Emirates and Angola have seen relatively limited reductions. ”

3. Russia plans to export 9.3 million tons of ultra-low sulfur diesel from the Baltic Sea in July and 1.167 million tons in June.

4. After the implementation rate of production reduction reached 96% in May, Russia intensified the reduction in June. As of last Sunday, Russian oil companies had produced a total of 35.62 million tons of crude oil and condensate this month, according to the cdu-tek Department of Russia’s energy ministry. According to the conversion rate of 7.33 barrels per ton, it is equivalent to an average of 9.324 million barrels per day. If Russia extracts condensate at the same level as in May (with a daily output of about 800000 barrels per day, according to the calculation of Bloomberg), the country’s daily crude oil production will reach 8.524 million barrels this month, further approaching the OPEC + production target.

5. Alberta governor Kenney: Alberta “urged” Texas to follow Canada’s lead in reducing oil production. Global oil supply is expected to be short in 12-18 months. “Optimistic” about the “strong future” of the oil industry.

6. Petroleum logistics, an oil transportation consultancy, said Iraq still needs to cut production by 300000 barrels a day to fully comply with the OPEC + agreement. OPEC and 10 non OPEC countries need to reduce production by 1.55 million B / D to fully comply with the OPEC + agreement.