(a), the increase in demand for crude oil is the most essential reason for the rise in crude oil prices.
First of all, the recovery and strong growth of the world economy have led to an increase in demand for crude oil, pushing up oil prices.
Second, the western countries led by the United States have greatly increased their oil reserves, which has aggravated the contradiction between oil supply and demand and exacerbated the rise in oil prices.
(2) Insufficient supply: another major reason for the rise in oil prices.
First, the instability of geopolitical factors has led to a decrease in oil supply and boosted oil prices.
Second, the constant emergence of unexpected events has added fuel to the fire, making oil prices higher.
(3) Monetary factors and inflation contribute to the rise of crude oil prices.
First, the relative depreciation of the dollar boosted the price of crude oil.
Second, the absolute depreciation of the dollar caused by inflation has led to an increase in commodity prices and an increase in crude oil prices.
(4) Speculative funds are the direct driving force for the rise in oil prices.
From the above analysis, we can see that the contradiction between supply and demand is the essential reason for the rise in crude oil prices. It is the intensification of the contradiction between supply and demand that makes the supply and demand of crude oil in a fragile balance. In this case, whenever there is any trouble, people will worry that the relationship between supply and demand will be broken, which will lead to the interruption of supply and the sharp rise of crude oil prices.
Once the price of crude oil rises:
20 14 the biggest black swan event in the international capital market is the collapse of oil prices. In the middle of the year, Brent crude oil still stood at the level of 1 15 USD per barrel. In the second half of the year, the price of crude oil suddenly collapsed and fell by nearly 50% by the end of the year. Brent crude oil is currently fluctuating in the range of 55-58 dollars per barrel. Especially in the last three months, oil prices have plummeted by nearly 40%.
What caused the oil price to plummet so sharply in the short term? How will the 20 15 oil price develop?
The fundamental reason that affects the change of oil price is the relationship between supply and demand. In addition to supply and demand, geopolitics, weather factors and capital flows are frequently cited by analysts, but only supply and demand are the decisive factors for the long-term trend of oil prices, and the other three variables either have a short-term impact on oil prices or are only factors that promote oil prices. From 1990 to 20 13, the oil price climbed from less than $20 per barrel to the highest level above $0/40 per barrel. During this period, the global economy achieved an average annual growth of 3.6%. By the end of 20 13, the global economic aggregate had more than doubled compared with 1990 at constant prices. In the same period, the average annual growth of global oil production is only 1.25%, which is seriously lagging behind the growth of demand. It can be seen that strong demand is the main driver of the rise in oil prices. Of course, the oil price during 1990-20 13 is not a journey to the west. During this period, there were five major adjustments, each between 33% and 76%, and the adjustment time span was about 2-9 quarters. In these five adjustments, except the one in the third quarter of 2006, we all saw the slowdown of demand growth, and the funds sought safety, which pushed up the US dollar index.
Oil prices fell in the second half of 20 14, partly due to the demand side. In 20 14, except for the United States, the recovery speed of the global economy was actually slightly lower than expected, especially in the second half of the year, the economic growth in Europe and China slowed down, which led to a decline in the demand for bulk commodities. In this context, most of the global commodity prices fell to some extent in the second half of the year. However, we should see that in the same period, the prices of commodities such as copper, iron ore and aluminum, which also reflect the fundamental demand, generally fell by only 10%-20%, while only the price of crude oil fell by 50%. Therefore, the decline in demand has a certain impact on the decline in crude oil prices, but it does not constitute the most direct factor. The decline in crude oil prices is more influenced by the supply side.
The impact on the supply side mainly comes from two aspects, one is the production of heavy shale oil in the United States, and the other is the resumption of production in traditional oil-producing countries such as Libya and Iraq. In 20 14, the US crude oil output greatly exceeded the previous expectations. Although the oil production in the United States has been surprisingly high in recent years, its impact on oil prices has only recently reached its maximum, because the scale of production growth has reached a significant level. With the innovation of production technology, breakthrough progress has been made in horizontal wells and hydraulic fracturing technology, and the production cost of shale oil and gas in the United States has decreased and the output has continued to rise. The shale oil production in the United States has developed from less than 500,000 barrels per day in 2008 to 4 million barrels per day now, and it is expected that its proportion in the future crude oil production in the United States will gradually increase. This directly led to an increase in US crude oil production from 5 million barrels per day in early 2008 to 9 million barrels per day now. In addition to the increase in supply from the United States, with the easing of geopolitical crisis in oil-producing countries such as Iraq and Libya, OPEC crude oil resumed normal supply. In the third quarter of 20 14, the crude oil output of the Organization of Petroleum Exporting Countries was 30.3 million barrels per day, which was higher than the upper limit of daily oil output.
From the above analysis, it can be seen that, on the whole, crude oil production is still increasing in the case of insufficient global demand, and the imbalance between supply and demand is the main reason for the decline in crude oil prices. Among them, the impact of demand accounts for 20%-30%, and the impact of supply accounts for 70%-80%.
Under the framework of our analysis, to predict the trend of crude oil price of 20 15, we should also analyze it from both demand and supply. On the demand side, we are still cautiously optimistic about the world economy in 20 15 years. In the fourth quarter of the United States, the economic growth reached an astonishing 5%, and the overall economy driven by consumption is estimated to continue at 20 15. The European Central Bank predicts that the QE process will accelerate in the first half of 20 15, and the European economy is expected to accelerate its rebound in the second half of 20 15. China and Indian economic reforms in emerging markets will also boost economic growth. In addition, low oil prices will help reduce the overall global inflation level, enable the central bank to continue loose monetary policy, and contribute to the recovery of the global economy. In this context, we believe that the global demand for crude oil in 20 15 years should be a slow growth trend.
As for the supply side, the two biggest uncertainties in 20 15 are: first, whether shale gas manufacturers in the United States will reduce production due to the rapid collapse of oil prices, and second, whether major oil producers, especially OPEC countries, will reach an understanding on reducing production. At present, there are still different opinions on the production cost of shale oil. According to the annual reports of major shale oil producers in the United States, the average production cost of shale oil producers is about 65-80 dollars, which means that if the current crude oil price is maintained, most shale oil producers will be unprofitable. The marginal cost of shale oil production, about $30, is still less than the current crude oil price, which is the main reason why shale oil producers can still maintain production. However, under the premise that the oil price is lower than the production cost for a long time, it is impossible for these manufacturers to continue to operate for a long time. At low oil prices, the possibility of these manufacturers continuing to expand their production capacity is declining sharply. In October/April/June/June/June/October, the number of new oil wells in the United States decreased by nearly 40%, which shows that the current oil price has hit crude oil producers. 20 15, 1 In June, mining giant BHP Billiton announced that it would close 40% shale oil wells in the United States before the end of this fiscal year due to the low oil price. Therefore, we believe that if the oil price continues to be so depressed, American shale oil producers are likely to cut crude oil supply on 20 15.
As for the measures of OPEC countries, the difficulty of forecasting is more uncertain than shale oil production. In the crude oil countries of the Organization of Petroleum Exporting Countries headed by Saudi Arabia, the production cost of crude oil is about 40 US dollars per barrel, while the cost of Saudi Arabia is as low as 20 US dollars. So this time, in the case of the overall collapse of crude oil, Saudi Arabia repeatedly shouted that it would never cut production, while other members of the Organization of Petroleum Exporting Countries were ambiguous. Of course, there are many speculations about the reasons behind Saudi Arabia's tough attitude, including letting American shale oil companies go bankrupt, punishing Iran, Russia and Iraq, and restraining disobedient members of the Organization of Petroleum Exporting Countries. However, considering that oil exports are basically the most important source of income for these OPEC countries, the oil price balance point cannot be considered only from the production cost. Under the current oil price, only Kuwait and Qatar can maintain the balance between fiscal revenue and expenditure and trade revenue and expenditure. Saudi Arabia, the most hawkish country, can only guarantee a fiscal balance of $80. If the oil price remains at the current low level, OPEC countries will inevitably face the reduction of government expenditure and the overall decline of residents' welfare level. In the medium and long term, this situation is unbearable for governments. Therefore, we believe that if the low oil price lasts for about half a year, at some point in the second half of 20 15, the possibility of OPEC starting to cut production is not low.
At the same time, we should also see that the political influence of the United States on OPEC countries, especially Saudi Arabia, Kuwait, Iraq and other Gulf countries can not be ignored. Although the current low oil price can promote domestic consumption in the United States in the short term, it is conducive to the economic growth of the United States, and it can also play a role in suppressing Russia to a certain extent. However, if the oil price remains low for a long time, its impact on the overall American economy will become more and more unfavorable. First, the production and technological progress of shale oil will be restrained, and the progress of achieving long-term energy self-sufficiency in the United States may slow down; Secondly, junk bonds issued by American energy companies currently account for 20% of the overall junk bond market in the United States. The decline in crude oil prices will increase the default rate of the junk bond market in the United States, and then accelerate the rise of the overall loan cost, which will have considerable lethality to the overall capital market in the United States. In view of this, we believe that starting from 20 15, the United States will gradually increase the pressure on OPEC countries, and the pressure on OPEC countries to reduce production is increasing.
To sum up, from the perspective of supply and demand, the recovery rate of global economy in 20 14 was actually slightly lower than expected, especially in the second half of the year, the economic growth in Europe and China slowed down, which led to the decline in demand for bulk commodities. Therefore, weak demand can partly explain the downward logic of oil prices, which is consistent with previous downward cycles with large oil prices. From the supply side, the progress of shale oil technology in the United States and the promotion of new energy applications (especially in automobile power) may also be the main reasons for changing investors' optimistic expectations of oil prices. However, the increase of supply is a gradual process, and the promotion of new technologies needs more time. Rational judgment, oil prices should not fall so much. Moreover, the continued low oil price will crowd out the application of new technologies from the economic level, so the application of new technologies is not enough to change the relationship between supply and demand of crude oil at least at this stage, thus keeping the oil price at a low level for a long time.
We predict that with the further QE stimulus in Europe and Japan, the monetary easing policy in China and the further strengthening of the American economy, the global economy will recover obviously in the second half of 20 15. If we believe in the internal logic that supply and demand ultimately determine oil prices, we believe that there is not much room for the current crude oil price to continue to fall. From the cycle of half a year to one year, the rebound of crude oil price should be a high probability event. At present, for ordinary domestic investors, there are not many investment tools that can directly participate in the oil price game because crude oil futures are not listed. Huabao Xingye S&P Oil and Gas Fund tracks the S&P oil and gas upstream stock index, and its investment targets are selected companies in upstream industries such as oil and gas exploration, exploitation and production listed on major exchanges in the United States. From the historical data, the index has a high correlation with the international crude oil price, and its volatility is also very considerable. For domestic investors, this is a good tool to track oil prices.