Since March 7th, the international oil prices have experienced severe shocks. WTI's single-day gains and losses have exceeded US$1/barrel for three consecutive days and are currently supported at the US$60/barrel position. The main reason for such repeated fluctuations in oil prices was the economic policies and oil data from the United States, especially from the record high output of the United States. As a result, the risk of a decline in international oil prices has rapidly increased in the second half of this year. Due to the serious loss of the market share, the OPEC production cut plan will also be in a difficult position. Once the production cut-off plan is declared to be terminated, crude oil prices will inevitably usher in a wave of decline.
US President Trump's levying tariffs of 25% and 10% on steel and aluminum is already a crucible. Coon’s resignation from the White House’s economic adviser has had little effect, and the resulting global trade war is in turmoil. Once the specific regulations and implementation time are implemented, it will inevitably further stimulate the stock market crash in the United States, and the crude oil market will inevitably be seriously implicated.
The latest US oil data shows that as of the week of March 2, US crude oil production increased again by 0.4% to a record high of 10.36 million barrels per day, and further approached the world’s largest crude oil producer, Russia’s production level, which produced nearly 1100 Million barrels/day.
Supported by the rapid increase in U.S. crude oil production, U.S. crude oil exports are also rapidly gaining market share in oil-producing countries. In February, the average daily crude oil export volume of the United States was 157.7 barrels, an increase of 63.7% over the same period of last year. Since the beginning of the year, the average daily crude oil export volume of the United States has reached 1.47 million barrels, an increase of 88.6% over the same period of last year. The first target of the US crude oil export is the Asian market, including China, Japan, and South Korea and other major oil demand countries.
According to the China's crude oil import data, the quantity of crude oil from the United States has undergone a qualitative leap. In January of this year, China imported 2.01 million tons of U.S. crude oil, up 673 percent year-on-year. In 2017, China imported 7.65 million tons of U.S. crude oil, which was only 490,000 tons in 2016. With the increasing demand for crude oil imported from local refineries, light sweet oil in the United States will gradually become popular in the Chinese market.
This has had a huge impact on OPEC's production cuts. According to the OPEC agreement on production reduction at the end of November 2016, 11 oil-producing countries participating in production cuts produced a total of 1.8 million tons per month. This part of the space for reduction can be easily filled by the United States. In the past, the quantity of Chinese crude oil imported by China alone has exceeded OPEC’s share of production cuts. In January of this year, Saudi Arabia even fell out of the top three sources of China's import source country, which forced Saudi Arabia to consider ending its production cuts.
The Minister of Energy and Industry, Farah, recently stated that OPEC and its allies may gradually resume the supply of crude oil in the first quarter of 2019 after the production cut-off agreement expires at the end of 2018. Affected by this news, the market expects that the organization may start the exit of production cuts in the second half of this year. If this expectation is fermented, it will inevitably lead to a sharp drop in oil prices. This risk factor will escalate in the second half of this year.