On February 3, the U.S. WTI crude oil futures market rose, with the settlement price of the main contract at US $55.69/barrel, up US $0.93. Brent crude oil futures market prices also rose, the settlement price of the main contract at 58.46 U.S. dollars / barrel, or 1.00 U.S. dollars. So far, oil prices have risen significantly for three consecutive trading days this week. According to the monitoring of business news agency, WTI has risen by 6.68% and Brent by 6.10% in recent three days. On February 3, the settlement price of WTI reached the highest level in nearly a year.

On the one hand, the extremely cold weather caused by the blizzard attack in the southeast of the United States led to a rapid rise in fuel heating demand. Moreover, recently, the organization of Petroleum Exporting Countries and its allies (OPEC +) have continued to effectively promote production reduction, which has brought a good supply side environment to oil prices. Moreover, the sharp decline in US commercial crude oil inventories in the past two weeks has become a direct driver to stimulate the rise of oil prices.

It began to snow in the northeast of the United States on the evening of January 31, and the snowstorm intensified on February 1. The temperature dropped sharply in many areas due to the combination of rain and snow. As of February 3, New York City and New Jersey have declared a state of emergency. Although the flight grounded depresses the demand for some aviation fuel, the impact is short-term. The market still mainly judges that the continuation of cold weather may continue to benefit the demand for heating oil .

Meanwhile, US crude oil inventories continued to decline, which directly stimulated oil prices. A week ago, the US Energy Information Bureau (EIA) released data showing that in the week of January 22nd, US commercial crude oil inventories fell 9 million 900 thousand barrels to 476 million 700 thousand barrels, and the data released in February 3rd showed that the crude oil inventories in the United States dropped by 994 thousand barrels to 475 million 700 thousand barrels as of January 29th. Analysts expect an increase of 446000 barrels. Crude oil stocks fell again. This is mainly due to the continuous vaccination of new crown vaccine, increasing demand, and OPEC + continuing to limit production, resulting in a decline in global inventories.

In terms of the recent implementation of OPEC + production reduction policy, the implementation rate of production reduction is relatively high. OPEC + has maintained a high implementation rate of production reduction since December last year, and OPEC’s output growth in January was less than expected. News shows that OPEC + will reduce production by 99% in December 2020. Among them, the implementation rates of output reduction of OPEC and its allies in December 2020 were 103% and 93% respectively, and Russia also performed positively. According to the agreement, Russia increased production in January, but the data showed that the increase rate was slightly lower than expected. According to the latest news on February 3, OPEC issued a statement on Wednesday, saying that Iraq remains committed to fully comply with OPEC’s oil production reduction policy and will compensate for the overproduced oil production according to the decision of OPEC and its allies. OPEC + actively and effectively reduced production to balance the current decline in demand caused by the epidemic and bring fundamental benefits to the oil supply and demand environment.

In the near future, the business community believes that oil prices are easy to rise but difficult to fall in the short term. At the macro level, after the US Biden administration takes office, it is urgent to launch large-scale stimulus measures, and the implementation may be accelerated later, which will bring direct and positive stimulus to the stock market and the oil market. The continuous promotion of vaccination also releases the expectation of rising demand. Although the epidemic trend has not yet been reversed, market confidence is still recovering slowly. The fundamentals of supply and demand also tend to be positive. At present, OPEC + production reduction policy continues to be effectively promoted. Iraq may compensate for production reduction in the later stage, and Libya’s production will also decline, which will balance the risks of the supply side. Moreover, according to the current signs, it is difficult for the US and Iran to return to the “Iran nuclear agreement”, and the short-term release of Iranian supply is not expected. However, the increase of shale oil production in the United States is still the main uncertain factor of crude oil supply in the future. Recent data show that the number of active drilling rigs for oil and natural gas in American energy companies has risen for ten consecutive weeks, and the increase of crude oil production in the United States is expected to increase significantly. However, the Biden administration will adopt a negative policy on traditional energy, and may achieve a certain degree of balance in the future. Overall, oil prices may remain high in the near future, and there is still the possibility of further exploration.