Last night, the commodity market collapsed again!
On Tuesday night, international oil prices collectively fell by more than 6%. Brent crude oil futures fell below the key psychological integer level of $100/barrel within an hour of the opening of U.S. stocks, and U.S. oil WTI fell to a minimum of $97/barrel. In the early morning, the decline in U.S. oil prices once expanded to 8%.
In terms of internal trading, as of the close of trading at 23:00, all major domestic futures contracts fell almost across the board. Fuel oil fell by more than 8%, palm oil fell by more than 6%, cotton fell by 6%, asphalt and PTA fell by more than 5%, staple fiber, soybean oil, and cotton yarn fell by more than 4%, coking coal and liquefied petroleum gas (LPG) fell by more than 3%, and thermal Coil, thread, rubber, vegetable oil, coke, and soybeans fell nearly 3%; in terms of increase, glass rose 0.71%.
Biden’s Middle East trip begins, urging OPEC to further increase production
According to foreign media reports, U.S. President Biden will embark on his first trip to the Middle East since taking office this week, and will devote himself to lobbying the leaders of the Organization of the Petroleum Exporting Countries (OPEC) to increase oil production and lower gasoline prices.
News shows that Biden will leave for the Persian Gulf on the evening of the 12th local time, and his trip will include Israel, the occupied territories of the West Bank and Saudi Arabia. Saudi Arabia and the United Arab Emirates are the only two OPEC members with large amounts of spare capacity. Official data shows they currently have reserves of about 3 million barrels per day.
According to reports, both Saudi Arabia and the United Arab Emirates have said that it is difficult to increase oil supply, but US National Security Advisor Sullivan believes that OPEC can still “take further action.” Sullivan said on the eve of Biden’s departure: “We will convey to OPEC our overall view, which is that we believe that the global market needs adequate oil supply to protect the global economy and protect American gasoline consumers.”
At the same time, Biden wrote a high-profile propaganda article in the “Washington Post” before his trip. He argued that the visit was “vital” to U.S. security. In the article, Biden repeatedly mentioned the “contributions” of his visit to the Middle East. He declared that “he will be the first U.S. president to fly from Israel to Saudi Arabia” and “he will be the first person since the 9/11 incident.” US president visiting the Middle East.”
According to reports, high oil prices are one of the thorny issues Biden faces domestically, which has also led to his continued decline in public support. A latest national poll shows that US President Biden’s approval rating plummeted to 30%, reaching a new low.
CITIC Futures crude oil analyst Zhu Ziyue told reporters that Biden has introduced a number of policies to suppress oil prices since the Russia-Ukraine conflict in March this year. Most of them are just talks on paper and have a relatively limited impact on oil prices. In the context of rising costs and tight refining capacity, , the price of refined oil has skyrocketed, directly pushing up the US CPI to the highest level since the 1980s. Factors such as high inflation, high oil prices, and economic recession have caused Biden’s approval rating to fall to a low level of less than 30%. As the U.S. midterm elections in November approach, Biden has to intensify efforts to suppress oil prices in the context of intensifying political pressure. However, it is difficult to increase the production of domestic crude oil and refined oil products in the United States, and Biden can only turn to OPEC. breakthrough in an attempt to ease oil price pressure through OPEC’s increase in production.
Li Jie, a crude oil analyst at CCB Futures, believes that Biden’s trip to the Middle East this time will urge OPEC to take further action, which to a certain extent will cause market concerns. However, he said that Saudi Arabia has strong demands for high oil prices and needs to balance the common interests of OPEC oil-producing allies and Russia. Currently, oil prices have fallen by nearly 20% from their June high, so Saudi Arabia will be more cautious in its decision to increase production. In addition, last week, Saudi Arabia significantly increased the official selling price (OSP) of crude oil to all regions in August, almost hitting a record high, which also demonstrated its confidence in future crude oil demand.
The implementation rate of production cuts in June reached 229%. OPEC looks forward to 2023 for the first time: the tight situation in the oil market remains difficult to alleviate.
On Tuesday evening, Beijing time, OPEC released its latest monthly market report and provided its first outlook for the oil market in 2023. OPEC’s July monthly report showed that the supply shortage in the oil market has not been alleviated. Although OPEC increased production in June, its total output is still far below the agreed amount.
Data show that OPEC crude oil production increased by 234,000 barrels per day in June, reaching 28.716 million barrels per day. The increase in crude oil production was mainly contributed by Saudi Arabia, the United Arab Emirates, Iran, Kuwait and Angola, while production in Libya and Venezuela decreased. Against the background of political turmoil in Libya and production capacity constraints in Angola, Nigeria and other countries due to insufficient investment, although OPEC increased production in June, its total output is still far below its agreed volume. At the same time, the implementation rate of OPEC production cuts reached 229% in June.
In terms of market outlook, OPEC said that due to the resurgence of the epidemic and continued geopolitical conflicts, OPEC expects oil demand to decrease in the second half of 2022. However, due to stronger than expected oil demand in major OECD consumer countries in the first half of the year, OPEC expects global crude oil demand to increase by 3.36 million barrels per day year-on-year in 2022, which is the same as last month.
Looking forward to 2023, OPEC believes that the improvement of geopolitics and the easing of the epidemic will boost oil consumption. Oil demand growth next year will exceed supply growth. The tight oil market is not expected to ease. Although most member countries have already opened up production at full capacity, The group still needs more crude oil.
The organization predicts that global crude oil demand will increase by 2.7 million barrels per day year-on-year in 2023, while supply outside OPEC will only increase by 1.7 million barrels per day.��/day. This means that global oil demand growth next year will exceed supply growth by 1 million barrels per day. The organization predicts that total global demand will reach 103 million barrels per day in 2023. To balance supply and demand, OPEC needs to produce an average of 30.1 million barrels per day of oil in 2023, 1.38 million barrels per day higher than June production capacity.
OPEC pointed out that its 2023 forecast is based on two assumptions: the war in Ukraine will not escalate, and risks such as rising inflation will not have a serious impact on global economic growth. OPEC+ oil production increases have been below target in recent months due to underinvestment in oil fields by some OPEC members and falling Russian output.
International oil prices continue to plummet
On Tuesday, international oil prices plunged sharply. Brent and WTI crude oil futures both fell by more than 6% that night, with Brent crude oil falling below the US$100/barrel mark and WTI crude oil falling to US$97/barrel. In the domestic market, the decline of INE crude oil futures was slightly weaker than that of the external market, with a decline of around 4% in overnight trading. However, the differentiation between high and low sulfur fuel oil is obvious. High sulfur fuel oil futures fell 7% in night trading, hitting a half-year low, while low sulfur fuel oil futures fell nearly 3%. The price gap between high and low sulfur continued to widen.
Li Jie believes that the main support for the current market lies in the low elasticity of the supply side. The production capacity of small and medium-sized OPEC members is tight, and the production increase rate continues to be lower than expected. U.S. shale oil is subject to capital expenditures and rising costs, and the increase in production is also extremely slow. The downside risk lies in whether the European and American economies will exert a significant drag on crude oil demand, which is still controversial in the market.
Zhu Ziyue said that four major risks will cause oil prices to continue to decline: First, the market’s current trading on macroeconomic recession expectations has not yet ended, the Federal Reserve may still significantly raise interest rates this year, and considering the accelerated recession of the non-U.S. economy, the strength of the U.S. dollar, the price of commodities The financial attributes continue to be suppressed; secondly, OPEC reached an increase in production this week, relaxed production restrictions, and entered the free production stage, and supply pressure was gradually eased; thirdly, marginal demand slowed down, and the crack price difference of refined oil fell sharply. On the one hand, travel At the end of the peak season, the demand for gasoline and jet fuel fell month-on-month. On the other hand, the economic downturn has weakened the demand for diesel and other industries. Fourth, the impact of geopolitics has slowed down. Europe and the United States are discussing the implementation of volume-guaranteed and price-limiting measures for Russian oil. If reached, it will alleviate geopolitical tensions. Influence. In addition, regarding Biden’s visit, judging from the information currently leaked and the pressure faced by Biden, she believes that there is a high probability of reaching an OPEC increase in production to suppress oil prices.
However, Zhu Ziyue said that the current global oil inventories are still low, showing that the current fundamentals are still tight, and low supply elasticity supports prices. She believes that what the market needs to be most vigilant about now is the grasp of the rhythm of price transactions. It can be seen that the current fundamentals of energy are still relatively strong, but the market is currently focusing on the impact of macroeconomics on expectations. When the expected transaction ends, if the reality has not weakened, or the expected fulfillment time is long, prices may recover.
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