Last Friday night, crude oil led to a rebound in commodities, and some short sellers made profits and left the market, which gave the market a breathing window. But before that, on the night of July 14, when WTI crude oil fell sharply towards US$90/barrel, and the price was already lower than before the Russia-Ukraine conflict broke out, many investors were lamenting the rapid changes in the market. By now, the oil price had already It has fallen by nearly US$30 per barrel from its June high. The backdrop of all this is a systemic plunge in the entire commodity market. In the past five weeks, the commodity index has suffered its largest decline in 14 years. Only during the financial crisis in 2008 did such a level of panic decline occur. The starting point for this round of commodity decline was the higher-than-expected May CPI data released by the United States in early June, which triggered the Fed’s hawkish attitude of vigorously raising interest rates and unconditionally controlling inflation. The June U.S. CPI data released on July 13 It is even more terrifying, with a year-on-year increase of 9.1%, which further enhances the Federal Reserve’s expectations of vigorously raising interest rates.
The bull market in commodities has officially come to an end after this sharp decline, and most varieties have emerged from the top and entered a technical bear market. After the oil price fell by nearly $30 per barrel, the foundation of the bull market has been loosened. Due to geographical factors and insufficient investment in the past few years, there are still some uncertainties on the supply side. This will make crude oil a relatively resistant product. In the short-term, all commodities have a demand for an oversold rebound. Oil prices have conditions for a rebound. However, the factor that determines price is not just supply. From a macro and demand perspective, the upward momentum of oil prices has been obviously insufficient. The center of gravity of oil prices will oscillate downward in the second half of the year. In the later period, the focus should be on short-selling opportunities on rallies.
Crude oil market peak season demand faces test
Macro factors have become the factors that have the largest impact on price weight at the moment, but supply and demand are still worthy of our continued tracking. In the past week, the crude oil market released three major monthly reports. OPEC did not adjust its demand expectations. However, both the IEA and EIA further lowered their crude oil demand expectations and unanimously determined that oversupply pressure on the crude oil market increased significantly in the third quarter.
In its monthly report, the EIA highlighted the possibility that economic activity would be less robust than expected, leading to lower energy consumption than expected. High prices mean U.S. gasoline consumption from July to October will be lower than previously expected, with daily demand in July reaching 9.07 million barrels, down 2.2% from the June forecast and lower than in July 2019 before the COVID-19 pandemic. Consumption fell 4.8%. Global oil growth forecasts for this year have been revised down due to lower economic forecasts, with demand now expected to increase by 2.2 million barrels per day, compared with an estimate of 3.6 million barrels at the beginning of the year. In addition, the EIA also highlighted that factors driving energy supply uncertainty include how sanctions affect Russian oil production, OPEC+ production decisions and the growth rate of U.S. oil and natural gas production, which is where the IEA and OPEC emphasize that the supply situation remains severe. risk point.
OPEC’s first outlook for the oil market in 2023 shows that tight supply in the oil market has not been alleviated. Although most member countries have already opened up production at full capacity, the organization still needs more crude oil. OPEC predicts that global oil demand growth will exceed supply growth by 1 million barrels per day next year. To fill this gap, OPEC needs to significantly increase production, but due to insufficient investment and political instability, member countries’ current output is already far below what is needed.
The IEA judges that global oil inventories are still at extremely low levels and require strong policy intervention in terms of energy use. Otherwise, the world economic recovery will face risks. As demand growth slows, oil prices pose a threat to the economy. IEA Director General Fatih Birol warned at the Global Energy Forum in Sydney on July 12: “The world has never experienced an energy crisis of this magnitude in terms of depth and complexity. We may not have seen it yet. Worst case scenario – this is affecting the whole world.” Western sanctions on Russia, the largest exporter of oil and natural gas, have sent oil prices soaring, raising the cost of gasoline, home heating and industrial electricity around the world. , increasing global inflationary pressures and leading to large-scale protests in many regions from Africa to Sri Lanka. The security of oil and gas supplies in Europe and elsewhere will continue to face challenges. “This winter in Europe will be very, very difficult. This is a major problem that may have a serious impact on the global economy.” Birol emphasized again in his speech on Tuesday.
Although the market remains vigilant at the supply level, what has a greater impact on oil prices is the recent continued negative demand data. In last week’s U.S. EIA weekly inventory report, oil product inventories, including crude oil and refined oil inventories, rose across the board. Crude oil inventories increased by 3.25 million barrels, Cushing inventories increased by 310,000 barrels, gasoline inventories increased by 5.82 million barrels, distillate inventories increased by 2.6 million barrels, total oil product inventories excluding SPR increased by 21.74 million barrels, and total oil product inventories increased continuously. Added in week eight. At the same time, EIA data showed that the U.S. refined oil product meter demand was across the board that week.a-preview-src=”” data-preview-group=”1″ src=”http://pic.168tex.com/Upload/News/image/2022/07/19/20220719091319_4957.png” width=100% height=auto />
After a 5-week slump, the commodity market has accumulated a relatively strong demand for oversold rebound and recovery. Most varieties rebounded last Friday night. This may be the turning point for the commodity slump to come to an end, and the market has a larger trend. The probability of entering the repair stage will help crude oil, which has a tight supply structure, recover some of its past losses. The specific extent of the rebound will depend on the degree of stabilization of overall market sentiment. In the medium to long term, the bull market for commodities has ended. Although oil prices have room for speculation caused by supply-side instability, continued macro pressure and demand-side performance are putting pressure on oil prices, and the overall oversupply pressure in the third quarter If there is a significant increase, there is a high probability that oil prices will still show a downward trend, so pay attention to the rhythm.
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