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On Monday (November 15), U.
S
.
crude oil futures extended last week's decline, piercing the $80 mark.
Although the decline was modest, international crude oil prices have also fallen for the third consecutive week
.
The U.
S.
Energy Information Administration (EIA) said that global crude oil production would exceed demand expectations, depressing oil prices
.
Although the market continues to pay attention to the latest developments in OPEC+ production increases and the release of SPR in the United States, at the same time, the current high inflation level and the EIA monthly report to be released on Tuesday are expected to bring more variables to oil prices this week
.
The IEA's supply and demand expectations for the oil market have attracted attention
The U.
S.
Energy Information Administration (EIA) said last week in its November short-term market report that crude oil prices are expected to remain at current levels
due to slowing economic growth.
OPEC also cut its forecast for oil demand growth, saying demand from major consumers was weakening
.
Tamas Varga, an analyst at London-based oil broker PVM, said: "It will be interesting to see whether the IEA will confirm in its monthly report whether the EIA's view on rising production in the United States and non-OPEC countries, and OPEC's view on slowing oil demand growth in the fourth quarter due to
high oil prices.
" The International Energy Agency (IEA) will release its monthly oil market report
on Tuesday.
Richard Swann, global head of clean refined products at S&P Global Platts, said his analysis showed demand in the oil market would outstrip supply, at least in the fourth quarter of this year
.
This will mean a further increase
in oil prices.
"Oil inventories continue to decline
as OPEC+ remains in control of the scale of oil production recovery," Swan noted.
Last week, the possibility of U.
S.
crude oil releases from the Strategic Petroleum Reserve weighed on oil prices, though even if the White House does release the SPR, the impact of such a move could remain relatively mild and short-lived
.
”
The impact of the United States releasing SPR may be limited, and OPEC+ is resolute in controlling production increases
At present, the impact of higher oil prices on US inflation is much higher than that of other consumer goods
.
The use of SPR is one of
the few means that US President Joe Biden uses to reduce gasoline prices.
So far, OPEC has ignored calls from some countries, including the United States, to speed up production increases to rein in soaring oil prices
.
The world's largest oil and gas companies and many OPEC+ energy ministers held the Adipec meeting in Abu Dhabi this week, one of the industry's first major face-to-face events since the
pandemic.
The United Arab Emirates said OPEC+ could maintain its plan
to increase production by 400,000 barrels per day.
OPEC leader Saudi Arabia has said that insufficient investment in fossil fuels is responsible
for rising commodity prices.
With the support of nearly 200 national delegates supporting the green transition, it is unlikely that big energy companies will announce big spending
on oil anytime soon.
However, Saudi Arabia expects oil inventories to rise in the coming months, reducing the need
for OPEC+ to increase supply more quickly.
Hollub of Occidental said Biden should focus on boosting U.
S.
oil production rather than putting pressure on OPEC to speed up production
.
If the government wants more supply, she said, they should first ask U.
S.
producers
.
High inflation is a drag on consumer confidence, and a lower dollar may give new momentum to oil prices
On the other hand, concerns about inflation remain the top issue
affecting financial markets as a whole.
The University of Michigan's consumer confidence index fell to its lowest level in 10 years
.
In addition to expecting lower revenues next year, respondents were concerned that the U.
S.
government "has not yet put in place effective policies to reduce the damage from inflation,"
the survey showed.
PVM's Varga added that these concerns will weigh on sentiment in the oil market this week
.
Since oil trades in dollars, the strength of the dollar is inversely
proportional to the price of crude oil.
The stronger the dollar, the more
it costs to buy crude oil.
When inflation is high, the dollar weakens, causing crude oil prices to rise
.
Claudio Galimberti, senior vice president of analysis at Norwegian consultancy Rystad Energy, said he will also be watching the dollar this week to determine where crude oil prices are moving
.
If inflation continues to be as high as it is now, crude oil prices could be bullish
.
In addition to this, Galimberti said that the increase in the number of coronavirus infections may eventually lead to lower demand, offsetting some of the impact of
inflation.
"If the fourth wave of the pandemic is strong, that will be a bearish factor
weighing on prices in the coming weeks," he said.
"
Although the market continues to pay attention to the latest developments in OPEC+ production increases and the release of SPR in the United States, at the same time, the current high inflation level and the EIA monthly report to be released on Tuesday are expected to bring more variables to oil prices this week
.