Market Outlook

Oil prices closed higher for the second consecutive day, with crude managing to recover from Thursday's evening session pullback and rally again, boosting market sentiment. Western diesel markets strengthened once more, reflecting persistent supply tightness that provided additional momentum for crude's rebound. The Russia-Ukraine situation has entered a waiting period, with Trump stating that developments on the conflict will be known within approximately two weeks, after which alternative strategies may need to be adopted. Additionally, the United States announced a new round of sanctions targeting Iran-related vessels and entities, including Yangshan Shenggang International Oil Storage and Transportation Co., Ltd. and Qingdao Port Haiye Dongjiakou Oil Products Co., Ltd.

Recent reports indicate that both China and South Korea are initiating deep reforms in their petrochemical and refining industries, eliminating outdated capacity and pivoting toward high-value fine chemicals to ensure future competitiveness. The chemical sector has shown increased rebound momentum over the past two trading sessions, boosting energy and chemical sector sentiment. However, eliminating refining capacity presents a relative headwind for upstream crude oil, as it implies that Asia's already decelerating crude demand will face further suppression.

The Indian government stated it will continue purchasing Russian oil. On August 21, foreign ministers of Russia and India will discuss strengthening strategic partnership matters in Moscow, with Putin also receiving the Indian Foreign Minister. India-Russia trade relations are expected to be consolidated, providing some relief to concerns about Russian exports to India. From practical observations, India has indeed increased crude purchases from other regions following higher U.S. tariffs on India, though the specific impact on Russian oil imports requires further monitoring.

After two consecutive days of rebounds, oil prices have temporarily stabilized the situation, particularly with European markets showing notably strong performance. However, without factors sufficient to lift market expectations, relying solely on technical corrections can hardly change oil's downward trajectory. As the consumption peak season nears its end, supply surplus pressure will gradually intensify as the primary driver facing oil markets for the remainder of the year. Based on this week's performance, while a return to a strong pattern cannot be ruled out entirely, the difficulty is considerable. Oil prices will next challenge the July consolidation platform resistance, with breakthrough probability expected to be relatively low. Pay attention to rhythm management and participate cautiously.

Daily Updates

[1] WTI crude futures closed up $0.81, gaining 1.29% to $63.52 per barrel; Brent crude futures closed up $0.83, gaining 1.24% to $67.67 per barrel; INE crude futures closed up 1.27% at 492.9 yuan.

[2] Dollar index rose 0.42% to 98.65; HKEX USD/CNY gained 0.02% to 7.1679; U.S. 10-year Treasury fell 0.26% to 111.56; Dow Jones Industrial Average declined 0.34% to 44,785.5.

Recent News

[1] Iraq Announces Five-Year Plan, Targeting 6 Million Barrels per Day Production Increase

(1) Iraq unveiled its 2024-2028 five-year development plan, aiming to boost daily oil production to nearly 6 million barrels by the plan's end.

(2) Iraqi Prime Minister's Economic Advisor Mudhar Saleh stated the plan also aims to increase associated gas utilization from the current 40% to 90%.

(3) The plan projects total revenues of approximately 710 trillion Iraqi dinars (about $545 billion) over five years, with oil exports contributing roughly 631 trillion dinars (about $485 billion), accounting for approximately 89%.

(4) Planning Ministry spokesperson Abdul Zahra Hindawi said the projected annual average revenue of $109 billion will support government investment, achieving the target of over 4% annual economic growth during the plan period.

(5) Saleh also noted that this plan differs from previous ones by being based on key performance indicators (KPIs) with assessments conducted every six months.

(6) Iraq has awarded nearly 30 oil field development contracts to foreign companies, including TotalEnergies, BP, and multiple Chinese companies over the past two years.

[2] Middle East Crude Market: Oman and Murban Premiums Stabilize, Dubai Retreats

(1) Thursday saw divergence in Middle East crude benchmark spot premiums, with Oman and Murban crude spot premiums maintaining two-week highs.

(2) In contrast, Dubai crude spot premiums retreated, with premiums relative to swap trading falling 13 cents to $2.48 per barrel.

(3) Despite pressure from Indian refineries resuming Russian crude purchases on the Middle East market, strong demand for specific grades in spot trading provided market support.

(4) Cash trading data showed Dubai crude transactions concentrated mainly at $69.66 and $69.68 per barrel.

(5) Additionally, Saudi Arabia's June crude exports fell to three-month lows, while Singapore middle distillate inventories continued rising due to increased imports.

(6) Sinopec Shanghai Petrochemical posted a net loss in the first half due to weak demand for refined oil and chemical products.

[3] According to Russia's Izvestia website on August 21, India has made its final decision regarding Russian energy. Indian Ambassador to Russia Vinay Kumar stated that despite U.S. pressure, New Delhi will continue purchasing Russian oil. On August 21, foreign ministers of Russia and India will discuss strengthening strategic partnership matters in Moscow. Kumar said India will not consider imposing an embargo on Russian oil. He told Izvestia: "No, India will only purchase what is most beneficial for itself... The issue is not whether there should be an embargo; this concerns national security, economic and energy interests, especially our people's energy needs. Therefore, for economic reasons, we will continue purchasing your country's oil. Our government has clearly stated that India will take all measures to protect its national interests, and ensuring energy security for 1.4 billion Indians is precisely where national interests lie." Kumar expressed that India is extremely sensitive to any measures and actions that "infringe upon Indian sovereignty."