1. Review of the Markets (1) International crude oil dropped to a daily low at the start of the European market, but after the non-agricultural statement, it leveled off and started to rise. After the non-agricultural statement, the price of WTI petroleum oil jumped to 77.08 USD per barrel and then settled at 76.61 USD per barrel, while the price of Brent petroleum oil jumped to US$83.06 USD per barrel and then settled at US$82.66 USD per barrel, both increases of 1.44 percent. Last week, crude prices in both the United States and Bursa fell, erasing the advances made in the prior two weeks.
2. U.S. nonfarm payrolls rose by 311,000 in February, down from the prior month but still significantly higher than forecast. Recent Fed swaps indicate that the likelihood of a rate increase of 50 basis points in March has dropped below 50%. Rate cuts by the Federal Reserve of 25 basis points by the end of the year are already factored into Fed swaps.
3. Operating earnings for Saudi Aramco in fiscal year 2022 is 1.14 trillion riyals, while the market expects 1.18 trillion riyals. The bonus payout for the final quarter of the year was increased by 4 percent, to $19.5 billion. According to Nasser, CEO of Saudi Aramco, oil consumption will rise to nearly 102 million barrels per day by the end of 2023.
4. As much as 13 million acres of territory in Alaska and the Arctic Ocean will be off-limits to oil extraction operations under U.S. President Biden’s new policy.
5. Within the next 24 hours, the largest business banks in Britain must come to the aid of Silicon Valley Bank’s London office.
After filing for bankruptcy, Silicon Valley Bank was acquired by the US Federal Deposit Insurance Corporation. Moody’s downgraded SVB Financial Group, its main business, and announced it would no longer be ranking any of its subsidiaries. After that, tensions within the Silicon Valley Bank case grew. The Federal Reserve and the U.S. Treasury Department are weighing the provision of emergency deposit guarantee authorization; investment Defenders have called on the U.S. government to intervene in the Silicon Valley bank failure, fearing widespread tech industry failures and a wave of layoffs, as the U.S. discusses funding deposits as more banks fail. The United States is contemplating insuring Silicon Valley Bank’s unsecured assets, Bank of London is mulling over purchasing Silicon Valley Bank’s UK company, and key British commercial banks are obligated to save the UK office of Silicon Valley Bank within 24 hours. Musk said he was open to Twitter’s acquisition of Silicon Valley Bank; stablecoin giant Circle’s $3.3 billion exposure to Silicon Valley Bank sparked investor concerns; First Republic Bank and Western Alliance Bank said their liquidity and deposits remained Strong; Meituan urgently refuted the rumor that it had no deposits in the bank; some Silicon Valley Bank depositors sought to sell their deposits at a discount.
6. The European Union is pleased by the news that formal ties between Saudi Arabia and Iran will be renewed.
Researcher Ole Hansen of Saxo Bank
Despite increasing pressure, oil has not broken out of its range.
The oil market is stuck in a narrow range as increasing demand in Asia tries to balance a decline elsewhere, particularly in the United States, where Powell’s statement to Congress indicated the Fed is prepared to risk recession to keep inflation in control. Although reports indicated a rebound in Chinese demand, investors were still on the fence about GDP growth projections. Additionally, the market’s low risk appetite was attributed to worries about the Silicon Valley Bank disaster. Despite these disadvantages, prices have not dropped significantly enough to break the level they’ve been in since late November. The short-term focus of the energy market will be on socioeconomic factors unless there is a major shift in the supply and demand ratio. In the near term, Brent could experience further weakening after breaking an upswing in its present range. This would be driven by the reduction of long holdings by funds, which have raised their net-long position to a 15-month high of 286,000 in recent weeks’ hands, or 286 million barrels. Meanwhile, the number of short positions dropped to a 12-year low of just 22,000 lots in the week ending February 28.
Consumers and traders alike are still optimistic about petroleum oil.
Most investors still see crude oil prices rising, particularly in the second half of the year. The anticipated massive demand increase from China’s resumption is, as predicted, the main cause of the optimistic outlook. The primary product driver is the anticipated rise in global aviation fuel consumption, which is expected to boost demand by 800,000 to 2.0 million bpd in FY2023 and by a significant 1.2 million to 1.5 million bpd this year. However, most market players anticipate Brent to trade between $75 and $95 and to more frequently reach the upper end of the range than the lower. But some market players are wary of the global macro situation, worried that economic constraints everywhere will slow demand development in China and elsewhere. Although we have a short-term optimistic bias, the global oil market’s delicate equilibrium makes a sustained uptrend unlikely. We expect the oil market to post a surplus of 1.5 million barrels per day in the first half of the year, but we believe that oil prices face upside risks, Chinese demand growth may be more than we estimate, and Russian supply has fallen sharply, and production in West and North Africa has fallen back to 2022 level.
The Barclays Bank
Due to more stable than anticipated Russian supply, we reduced our 2023 projections for both Brent and WTI by $6 to $92 per barrel and $7 to $87 per barrel, respectively. We forecast that the crude oil market will enter a supply deficit by the end of the year due to the ongoing revival of civil aircraft demand in China and nearby countries, the normalization of industrial activity, and the slowing of non-OPEC+ supply growth.
In the future months, demand in the petroleum oil market is anticipated to drop, particularly around the middle of the year, as a result of the severe downturn in economic activity in the world’s main countries. Crude oil consumption in developed countries is anticipated to fall in the second half of 2023, but this effect will be more than mitigated by China’s gradual return to growth. Russia’s failure to reroute some of its supply and Russia’s choice to reduce output mean that sanctions will have a greater effect on the supply side. The United States and Iran have been in talks, but so far nothing has been resolved. As a result of this situation, the petroleum oil market will be in limited supply and slightly in deficit by the end of the year due to increasing demand and weakened supply.