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CCTV Script 02/07/18

— This is the script of CNBC's news report for China's CCTV on July 2, 2018, Monday.

We know that there are 3 reasons behind the increasing oil price, first is OPEC over executes cut deals, second is US sanctions against Iran and third is the rising crude oil demand will further consume global storage, because of the coming summer. How will the oil price going on next?

The first variable is OPEC facing a plan to raise oil output. Among them, the news said that Saudi Arabian King Salman agreed on the request of US President Trump to increase production of 2 million barrels of crude oil. Saudi responded that they can use spare capacity to increase output when necessary, but will use this ability cautiously.

President Trump has been unhappy with the rising oil price during these several months, criticizing OPEC's production cuts for many times. Some analysis believes that because US has been benefited from the relatively low petroleum price in the past several years, now, the increasing oil price will give political pressure to Trump. Trump wrote on Twitter on June 30, announcing the commitment of the Saudi King. However, the details that Saudi will increase its production at what kind of speed are not mentioned yet, so Saudi’s commitment that they will raise outputs is still an uncertainty now, another point that we have to pay attention to is that, due to the deterioration of the Venezuelan economy in Apr and March this year, its daily outputs of crude oil declined from 2.5 million barrels to less than 1.5 million barrels per day. In addition, Angola’s crude oil production also fell due to insufficient investment, which causes OPEC's crude oil production is significantly lower than previously established standards.

So, the factors for the declined outputs may make OPEC's growth plan and Saudi Arabia's production commitment not come true. We need more data details to verity the variable differences next. The second point is US sanctions against Iran also boost the oil price. The market worries Iran’s crude oil exports will get strike, triggering a further concern about the supply. Now, the problem is Iran’s exports will be affected to what extend? Because of the secondary sanction threaten of US, many crude oil companies have withdrew their investment and crude oil business in Iran, but there are still many countries say they would not bend to the pressure from the US.

Among them, the Indian Ministry of Oil and Gas said that India does not recognize unilateral sanctions and only recognizes sanctions imposed by the United Nations. The Turkish government also on June 27 that does not intend to respond to US sanctions against Iran. Among them, Iran is India's third largest oil supplier, following Iraq and Saudi Arabia, while India buys about 700,000 barrels of oil a day from Iran.

At the same time, in order to deal with the sanction from US, Iran says they will allow the private business to export crude oil. Now Iran government has established a commission to find new experts for Iranian crude oil when the US imposes sanctions. Thus, the extent to which Iranian oil buyers can offset sanctions from the United States will determine the extent to which the oil supply from Iran is threatened. At the same time, the third variable is the consumption itself. Global crude oil will face the peak of summer consumption. Last week, we have seen that the US announced crude oil inventories have experienced drop that is beyond our expectation, next, changes in inventory and the intensity of consumer demand will further determine the future trend of oil prices. We will keep an eye on this issue.