Liu Shuangshuang, an energy and chemical analyst at Sanli Futures, said in an interview with reporters that yesterday’s sharp drop in crude oil is closely related to macro risks. On the one hand, as the Federal Reserve accelerated its pace of raising interest rates and made hawkish statements, its determination to curb inflation can be seen. The U.S. dollar index soared strongly, hitting a new high since December 2002, and the 10-year U.S. bond yield fell below 2.9% again. , so crude oil prices fell sharply under pressure; on the other hand, the U.S. economic data performed poorly last week, and the market’s expectations for economic recession became stronger. Nonferrous metals and European stock markets plummeted, and panic once again dominated the selling of risk assets. Therefore, in the early stage Crude oil, which is relatively resistant to falling prices, has also begun to make up for its losses.
According to the latest forecast from Bloomberg Economics, the probability of a U.S. recession within the next 12 months has soared to 38% after consumer confidence hit a record low and interest rates soared. The Dow and S&P 500 have plummeted, with both falling 15% and 20% respectively since the beginning of the year.
“At the same time, the recent marginal improvement in the supply and demand side of crude oil has also caused the decline of crude oil. From a supply perspective, although supply-side variables still exist, Biden plans to visit Saudi Arabia in mid-July. Although Biden stated that he will not promote production increase, The market still believes that the visit will help increase supply. On the demand side, the current negative feedback on the demand side has spread throughout the industrial chain. Under the high oil prices in the United States, gasoline consumption has been sluggish in the peak season. The recovery of aviation kerosene consumption, which everyone was unanimously optimistic about before, is also due to workers Shortage and bad weather are worse than expected. In addition, from a domestic perspective, although the Ministry of Industry and Information Technology has canceled the ‘star’ mark on communication itinerary cards, the epidemic situation in Beijing, Shanghai, Anhui and other places has begun to rebound recently. The domestic epidemic situation is still not optimistic, and crude oil demand The recovery is slow,” Liu Shuangshuang said.
Judging from the performance of the external market, on the night of July 5, external crude oil fell sharply, with Brent oil plunging by more than $14/barrel, and WTI crude oil falling below the integer mark of $100/barrel, and market panic continued to spread. As for the reasons for the flash crash of oil prices, Fawad Razaqzada, a senior analyst at Gain Capital Group, said that the main reason is that amid expectations of a global economic recession, investors’ concerns about weakening demand for crude oil have begun to outweigh concerns about tight supply. At the same time, investors’ concerns about crude oil The sell-off occurred just after the Fourth of July holiday, when market trading liquidity was at seasonal lows, so technicals intensified the sell-off amid growing concerns about recession amid low trading liquidity.
After experiencing the plunge the night before, unlike the internal trend, the external crude oil trend stabilized on July 6. In this regard, Liu Shuangshuang told reporters that this is mainly due to the substantial release of market panic. The market has fallen too fast in recent days and there is a certain demand for a rebound.
“The market trend of domestic crude oil is generally closely related to that of foreign countries, but it will be affected differently by delivery standards, regional fundamentals, exchange rates and other factors. From a fundamental point of view, China needs to adjust demand according to the epidemic situation , With the recent rebound of the epidemic at multiple points, expectations for a recovery on the demand side have begun to weaken, thus causing inconsistent trends in the internal and external markets,” Liu Shuangshuang said.
From the current point of view, Zheng Mengqi, an energy researcher at Hizheng Futures, told reporters that the supply side of the crude oil market is still tight. Among them, OPEC+ continued to increase production by 648,000 barrels per day in August, and U.S. crude oil production remained at around 12.1 million barrels per day. It was limited by capital expenditures during the year and it was difficult to expand significantly. In terms of demand, the high levels of U.S. automobile, diesel, and fuel cracking continue to fall, but are still at relatively high levels. Global COVID-19 entry quarantine has been relaxed, and demand tenacity still exists. As a result, crude oil inventories are at historically low levels for this period. Next, it is recommended to pay attention to Biden’s trip to the Middle East in mid-July and whether Saudi Arabia will use its idle production capacity to cooperate with the United States’ increase in production. In addition, Ecuador’s oil production rebounded 90% to 467,100 barrels per day after the protests, focusing on the restart of supply interruptions in Libya and Norway and the negotiations on the Iranian nuclear agreement. “Overall, tight supply, peak demand season, low inventory, and crude oil fundamentals are strong. However, declining demand, increasing supply, and market expectations of the Federal Reserve raising interest rates suppress oil prices. With strong reality and weak expectations, oil prices are expected to remain Mainly oscillation operation.” Zheng Mengqi said.
In Liu Shuangshuang’s view, with the expectation of macro risks and weakening demand, the risk of crude oil price decline still exists, but low inventory and supply-side disturbances still exist. In the short term, the possibility of another deep decline in crude oil is small. In the long term, against the background of marginal improvement in fundamentals and weakening macroeconomics, crude oil is likely to show a oscillating and weak trend.
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