International oil prices fell more than 6% in the previous trading day, and rose significantly on the 20th. The analysis points out that although the decision of major oil producing countries to increase production worries the market, it is expected that with the recovery of global demand, the supply and demand gap will still exist, and the international oil price is expected to continue to be supported.

As of the close of the 20th, the price of light crude oil for August delivery on the New York Mercantile Exchange rose $1, or 1.51%, to close at $67.42 a barrel; London Brent crude for September delivery rose $0.73, or 1.06%, to $69.35 a barrel.

Affected by the adjustment of production by major oil producing countries and market concerns about the epidemic situation, oil prices in New York and London Brent fell sharply by 7.51% and 6.75% on the 19th, respectively, the biggest one-day drop since September 8 last year and March 18 this year.

The organization of Petroleum Exporting Countries (OPEC) and non OPEC oil producing countries said on the 18th that they would extend the current production reduction agreement, which was originally due to expire in April 2022, to the end of 2022, and increase the average daily output by 400000 barrels from August this year. In addition, the meeting also decided to increase the production baseline of the United Arab Emirates, Saudi Arabia, Russia, Kuwait and Iraq from May 2022, with a total increase of 1.632 million barrels per day. This has aroused market concern under the current epidemic situation.

However, analysts believe that the gradual increase in production agreements reached by major oil producing countries will not lead to a significant increase in market supply in the short term, but will help stabilize market expectations. The biggest variable facing the future oil price is still the trend of global epidemic, and the market may be more sensitive to this.

Helioma Croft, head of global commodity strategy at Royal Bank of Canada, believes that the market can absorb the increase of 400000 barrels of daily crude oil supply per month. Eugen Weinberg, an analyst at German commercial bank, said that the agreement reached between OPEC and non OPEC oil producing countries has solved internal differences, helped restore investor confidence and expectations, and is good for oil prices.

It is also pointed out that, from the perspective of supply and demand, although the market’s concern about the spread of the new coronavirus delta strain is increasing, global oil demand is still in the process of rapid recovery, and there is still a gap in oil supply in the short term, which is expected to continue to support oil prices.

OPEC said that with the acceleration of the new crown vaccination, the economy in most parts of the world is still recovering, there are obvious signs of growth in oil demand, and oil inventories in OECD countries are declining.

According to the prediction of the International Energy Agency, oil demand will rebound strongly in the second half of 2021, and the annual energy demand is expected to increase by 4.6%. Despite the gradual increase in supply from oil producing countries, the global oil market is still likely to face a daily average shortage of 1.5 million barrels in the second half of this year.

Affected by the impact of the epidemic, the international oil price fell to a negative value in April last year, and OPEC and non OPEC oil producing countries also reached an agreement on reducing production in the same month, with an average of 9.7 million barrels per day. Since the implementation of the production reduction agreement in May last year, the international oil price has gradually picked up. In April this year, the major oil producing countries decided to gradually increase oil production from May. At present, the reduction rate is about 5.8 million barrels per day.