Commodities have recently entered an oscillation mode, with price fluctuations recurring and disorderly. Although some varieties rebounded last Friday night, in fact, the overall confidence in the commodity market has been declining since June. This year, the Federal Reserve raised interest rates four times in a row, with interest rates raised by 75 basis points in June and July respectively, the largest concentrated rate hikes since the early 1980s. It is highly certain that the Federal Reserve will continue to raise interest rates sharply by 75 basis points this week. As a result, the US dollar continues to strengthen, and international funds return to the United States. This operation has brought huge harm to other countries and regions around the world. Many countries are facing high inflation, In difficult situations such as currency depreciation and even debt defaults, global economic development is facing huge challenges, and the risk of economic recession is increasing. Against this background, risk appetite in financial markets, including the commodity market, continues to cool, and oil prices have continued to decline from highs in the past three months and have entered a technical bear market.
The performance of oil prices has made oil-producing countries restless. OPEC, led by Saudi Arabia, began to proactively manage expectations in an attempt to reverse the decline in oil prices. It can be expected that if the center of gravity of oil prices continues to shift downward, OPEC will most likely continue to increase its efforts to protect the market on the basis of cutting production by 100,000 barrels per day at the September meeting. Such efforts may slow down the decline of the center of gravity of oil prices, and even This will allow oil prices to rebound to a certain level in the fourth quarter. However, judging from the current overall market environment, if we want to reverse the trend, it will be difficult to restore confidence in the market just by relying on the efforts of the supply side. The market needs to see signs of economic recovery and an improvement in demand, but it is difficult to separate from the current situation. Judging from the global situation, it is undoubtedly a huge challenge.
IEA, OPEC monthly reports cautious outlook for oil prices
Global oil production rose for the third consecutive month, increasing by 790,000 barrels per day in August to 101.3 million barrels per day. Among them, the main increase comes from Libya’s strong recovery and Saudi Arabia’s production increase, which is also confirmed by the OPEC report. OPEC’s monthly report showed that Libyan crude oil production increased by 426,000 barrels per day in August to 1.123 million barrels per day. Saudi Arabia told OPEC that its production in August increased to 11.051 million barrels per day, an increase of 236,000 barrels per day from before.
The IEA believes that the entire supply side of the crude oil market has increased by 5 million barrels per day compared with a year ago. Russia’s oil production and exports have proven to be resilient. The level in August was only 400,000-450,000 lower than the level before the Russia-Ukraine conflict. barrel/day. The EU’s embargo on the import of Russian crude oil and products will take effect in December 2022 and February 2023 respectively, affecting 1 million barrels/day of petroleum products and 1.4 million barrels/day of crude oil. These oil products need to be re-searched. buyer. The G7 has adopted price-limiting measures against Russian oil. It is expected that by February 2023, Russia’s total oil production will drop to 9.5 million barrels/day, a decrease of 1.9 million barrels/day compared with February 2022. Nonetheless, the crude oil market will still show significant oversupply in the second half of 2022 and will be roughly balanced in 2023.
The IEA also lowered its forecast for global oil demand growth in 2022 by 110,000 barrels per day to 2 million barrels per day. In the fourth quarter of 2022 and the first quarter of 2023, the increase in oil consumption for power generation will reach 700,000 barrels per day. However, this was offset by a continued slowdown in demand recovery across the OECD. The growth of global oil demand continues to decelerate, and the IEA believes that crude oil demand growth will stop in the fourth quarter of 2022, but will increase by 2.1 million barrels per day in 2023.
OPEC maintains its forecast that oil demand will increase by 3.1 million barrels per day in 2022 and 2.7 million barrels per day in 2023. To help restore confidence in the market, OPEC emphasized that there are signs that despite adverse factors such as soaring inflation, the situation in major economies is better than expected. Oil demand in 2023 is expected to be supported by still solid economic performance in major consumer countries, the potential easing of epidemic restrictions, and reduced geopolitical uncertainty. The average global oil volume in 2023 is expected to be 102.73 million barrels per day, higher than the pre-epidemic level in 2019. Compared with the IEA’s judgment, OPEC’s assessment outlook is obviously more optimistic, significantly different from the market timetable, and has a strong protective flavor.
Although from a global perspective, demand-side performance continues to suppress oil prices, in fact it is not without bright spots. Recently, China’s crude oil processing volume has obviously entered a stage of rapid growth. As domestic refining profits improve, the operating rates of main refineries and local private refineries are increasing, and crude oil processing volume has reached a five-month high.
Pay attention to the Fed’s interest rate meeting
This week will see another Federal Reserve interest rate meeting. Judging from current market transactions, the Fed will raise interest rates by at least 75 basis points, and the possibility of even raising interest rates by 100 basis points is as high as a quarter. The performance of the global economy is getting worse, and the continued tightening of liquidity continues to put pressure on commodities. This has also made the market pay close attention to next week’s interest rate meeting.
The World Bank said on September 15 that the economy may be heading towards a global recession as central banks around the world raise interest rates simultaneously to combat persistent inflation. World Bank inA new study shows that after experiencing the post-recession recovery phase since 1970, the global economy is currently in the most severe slowdown, and the decline in consumer confidence has exceeded the situation before previous global economic recessions.
World Bank President Malpass said: “Global growth is slowing sharply and is likely to slow further as more countries slip into recession.” He worries that these trends will continue, causing damage to emerging market and developing economies. sexual consequences. Synchronized interest rate hikes and related policy actions underway around the world may continue into next year, but this may not be enough to bring inflation back to pre-COVID-19 levels.
A spokesman for the International Monetary Fund said that the economic slowdown is expected to translate into recession in some countries in 2023, but it is too early to tell whether there will be a widespread recession globally. Barclays economists also believe that global economic growth is heading towards an “increasingly synchronized downturn”, citing the intensifying energy crisis in Europe, the emergence of the new crown epidemic in some regions, and tightening financing conditions in many economies.
If nothing else, the financial market’s attention this week will still be focused on the final outcome of the Federal Reserve’s interest rate meeting in September, and before then, macro factors will continue to affect the market. Judging from the current market sentiment, the commodity market is expected to experience repeated fluctuations under the overall weak trend. There has been no news in the crude oil market that can stimulate investors’ enthusiasm for long positions. Oil prices will continue to oscillate and find a bottom. At present, the 80-90 US dollars/barrel area is a relatively acceptable range for both bulls and shorts. Before market sentiment deteriorates significantly, it is expected that it will be difficult for oil prices to fall below this area.
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