The relationship between supply and demand in the international crude oil market has entered a readjustment

Many market institutions are optimistic about international oil prices this year
.
Morgan Stanley expects Brent oil prices to rebound to around
$110 a barrel by mid-2023.
The agency believes that low investment levels, risks to Russian supplies, the end of the release of the Strategic Petroleum Reserve and a slowdown in U.
S.
shale oil production will constrain supply, and the recovery of China's economy and demand growth from the recovery of the aviation industry will drive oil prices higher
.

At the end of last year, the international crude oil market was shrouded in recession fears, and terminal oil consumption continued to languish, resulting in a continuous decline
in international oil prices.
At the beginning of the new year, international oil prices returned to an upward trajectory
.
Market analysts believe that China's economic development is expected to be an important factor
.
With the continuous optimization of China's domestic epidemic prevention and control policies, the demand for gasoline, aviation kerosene and other oil products linked to residents' travel is expected to contribute to the ultra-seasonal increase, which will drive international oil prices up
.
As of the close on January 9, local time, light crude oil futures for February delivery on the New York Mercantile Exchange rose by $0.
86, or 1.
17%, to close at $74.
63 per barrel; London Brent crude futures for March delivery rose $1.
08, or 1.
37%, to settle at $79.
65 a barrel
.

Jiang Xuefeng, vice president of CNPC Economic and Technological Research Institute, said that last year, mainly affected by the epidemic, domestic oil demand fell
significantly year-on-year.
Among them, the epidemic has a more serious impact on the transportation field, and with the adjustment and optimization of epidemic prevention policies, this situation will be significantly improved
this year.
The China National Petroleum Research Institute of Economics and Technology predicts that domestic oil demand will recover
quickly from the second quarter of 2023.
WoodMcKenzie, an internationally renowned consulting firm, said that global oil demand will continue to grow
in 2023, benefiting from the increased use of Chinese petrochemical raw materials.
An article published by Forbes magazine suggests that China could account for 60%
of global oil demand growth in 2023 as China's oil consumption returns to previous levels.
According to the International Energy Agency's (IEA) oil market report last December, global oil demand will increase by 1.
7 million b/d to 101.
6 million b/d
in 2023.

It is worth noting that while demand is rising, global oil supply is facing cuts
.
First of all, Western sanctions against Russia and countermeasures on the Russian side have brought supply pressure
.
Last September, G7 finance ministers reached an agreement to impose a price cap on Russian crude oil exports
.
In December last year, the European Union and the G7 officially put into effect a price cap mechanism for Russian seaborne crude oil exports, with a price ceiling of $60 per barrel
.
After that, the price of Russian crude oil exports exceeded the set price ceiling, and EU companies would be prohibited from providing financial services
such as insurance for Russian crude oil shipments.
This sanction caused strong dissatisfaction from the Russian side and made it clear that it would not accept the EU's price limit
.
Russian Deputy Prime Minister Novak, who is in charge of energy affairs, previously said that whether the price cap is $60 per barrel or any other price, it is interference with the market mechanism, and announced that from February 1, 2023, Russia will prohibit the supply of Russian oil and petroleum products
to foreign legal persons and individuals who directly or indirectly use the price cap mechanism in contracts.

Secondly, the "OPEC+" composed of OPEC and its oil-producing allies is also a key factor
affecting international oil prices.
In 2022, "OPEC+" has successively adopted three production policies
: increasing production, reducing production and waiting and seeing.
In the first half of last year, the Russian-Ukrainian conflict broke out, and the market's concerns about the interruption of crude oil supply intensified, and international oil prices soared and remained at about
$100 per barrel for a long time.
Lured by the high oil price dividend and strongly called by Western countries, "OPEC+" steadily increased production
with a plan to increase 400,000 b/d month by month.
However, after the third quarter of last year, as the global economic outlook weakened and international oil prices fell, "OPEC+" also started a new round of production
cuts.
At its 33rd ministerial meeting in October, the group decided to cut production sharply from November, cutting production by 2 million barrels per day from last August, the biggest drop since May 2020
.
At its last meeting at the end of last year, OPEC+ decided to maintain the above-mentioned production cuts, that is, from November last year to the end of December 2023, by 2 million barrels per day, equivalent to 2%
of global average daily oil demand.
"OPEC+" members want to maintain the benchmark for Brent crude oil prices at $80/b to $90/b
.
If the price of Brent crude oil is below $80 per barrel for a long time, it may trigger it to start a further production reduction mechanism
.
On February 1 this year, the "OPEC+" joint ministerial oversight committee, which oversees the implementation of production cuts, will meet again to evaluate the oil production policy, and more information
may be revealed about whether to adjust the policy.

Finally, the slowdown in U.
S.
oil production growth due to weak oil investment will also have an impact
on global oil supply.
According to the U.
S.
Energy Information Administration (EIA) and oilfield service providers, U.
S.
crude oil production was just over 12 million b/d as of December, as U.
S.
crude oil production hit 12 million b/d at the end of 2021, compared to 12.
9 million b/d
in the same period in 2019.
This means that high oil prices in 2022 have not motivated U.
S.
crude producers to increase production and return to pre-pandemic levels
.
Due to the characteristics of fast shale oil production in the United States, high initial production but fast decay, the increase in production depends to a large extent on the expansion of the
number of wells.
At present, the development bottleneck of the US oil industry mainly comes from two aspects: first, the reinvestment rate is limited, and the profits brought by high oil prices are used to generate free cash flow and shareholder returns; Since the shale oil revolution, asset input has made shale oil companies face high debt, and the pressure of debt repayment has limited capital expansion
.
In addition, last year the United States passed the Inflation Reduction Act, which contains a large number of support for the new energy industry and suppresses
traditional fossil energy.
In the context of medium and long-term carbon neutrality, the Biden administration's green energy policy has reduced the investment preference of shale oil companies, which has also restricted production growth
to a certain extent.

The IEA expects global oil supply to grow by 770,000 b/d in 2023, following a 4.
7 million b/d increase in 2022, which is significantly smaller than the 1.
7 million b/d increase in demand and means that global oil supply will tighten
in 2023.
This has also made many market institutions optimistic about international oil prices this year
.
Morgan Stanley expects Brent oil prices to rebound to around
$110 a barrel by mid-2023.
The agency believes that low investment levels, risks to Russian supplies, the end of the release of the Strategic Petroleum Reserve and a slowdown in U.
S.
shale oil production will constrain supply, and the recovery of China's economy and demand growth from the recovery of the aviation industry will drive oil prices higher
.
Bank of America predicts that international oil prices may rebound against the backdrop of the Fed's dovish monetary policy shift and China's economic recovery, with Brent crude oil expected to average $100 per barrel
in 2023.
Goldman Sachs released a report that the growing demand for oil may return the market to a situation of short supply from June, or push the price of Brent crude oil to rebound to $105 / barrel
by the fourth quarter.