Amid the persistent rise in global oil consumption expectations, international crude oil prices have paradoxically continued to declineThis trend can largely be attributed to an unexpected surge in global oil supply, yet many analysts believe that this is not the new normRecent indicators suggest that the global oil market is beginning to show signs of tightening supply, while demand appears to be recovering steadilyThis scenario hints at a gradual phase of inventory depletion in the international crude oil market, potentially leading to a supply-demand deficit in the latter half of the year.

As of May 30, the spot price for Brent crude oil fell to $75.95 per barrel, while WTI spot prices dropped to $71.64 per barrelOver the past twelve months, the prices for crude oil in the international market have plummeted by nearly 40%. The disheartening trend in oil prices cannot be solely attributed to the confirmed increase in oil consumption

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Since China's announcement of new pandemic policies at the end of 2022, analysis agencies, particularly the International Energy Agency (IEA), have been consistently revising upward their forecasts for the increment in both Chinese and global oil consumption for 2023. These upward revisions authentically mirror robust growth expectations in the global service sector and a revival in travel-related demand in emerging economies, especially in ChinaWhy, then, have international oil prices continued to slide despite increasing expectations for global oil consumption?

The pressures driving the sell-off stem from a confluence of factors: a robust increase in global supply, skepticism among overseas market participants regarding China's capacity for a steady economic recovery, concerns over a potential recession in the U.Seconomy, a high-interest rate environment in Europe and the U.S

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that stifles investment and consumption, and confusion surrounding many uncertainties in international geopolitical relationsThese elements have converged to strengthen the bearish sentiment among tradersOver the past month, the long-to-short ratio for Brent crude contracts dropped from 8X to 2X, significantly below the average of the past five yearsSimilarly, WTI crude contracts witnessed a sharper decline, with the long-to-short ratio plummeting from 11X to 4X during the same period.

Among the bearish factors mentioned, the unanticipated increase in global oil supply stands out as the most influentialWhen the war conflict in Ukraine first broke out in 2022, industry insiders widely expected that Russia's oil and refined product exports would plummetContrary to these expectations, however, Russia has effectively discovered new routes and methods for transporting oil to buyers in the Middle East and East Asia over the subsequent year

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As of the end of May, Russian oil supply has exceeded last year's levels by 1.7 million barrels per dayMoreover, during the same timeframe, exports from Iran and Venezuela have increased; the United States released 220 million barrels from its Strategic Petroleum Reserve (SPR) in 2022 to alleviate inflationary pressuresThe unexpected growth in oil supply has led to a rise in global oil inventoriesAccording to data released by the IEA in May, commercial inventories in the first quarter increased by more than 500,000 barrels per day, marking the fourth consecutive quarter of increases.

Will this unexpected supply become a new norm? The reality is that recent signs indicate a tightening supply in the global oil marketAs of May, eight OPEC+ member countries have implemented a voluntary production cut of 1.1 million barrels per dayRussia has committed to a reduction of 500,000 barrels per day beginning in March

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According to Kyler’s data, the exports from the eight OPEC+ countries that announced voluntary production cuts in May saw an actual reduction of up to 1.5 million barrels per day compared to their peak on April 25. Meanwhile, the total reduction across all OPEC+ member countries amounted to 1.4 million barrels per day, demonstrating an unusually high compliance rate with the cutsThe actual reduction in Russian output is around 400,000 barrels per day, reflecting a decline in refining and a month-over-month contraction in pipeline oil exportsAdditionally, owing to capital constraints and geological aging, the number of drilling rigs in the United States has also declined, dropping by 8% since early December, leading to a significant slowdown in oil production growthThe Saudi energy minister has recently warned bearish traders multiple times that they may incur costs for their positions.

Beyond the signs of tightening supply, data from China’s travel sector shows continued strong growth trends into May