Affected by factors such as the situation between Russia and Ukraine, expectations of an interest rate hike by the Federal Reserve, and the expected conclusion of the Iran nuclear deal, international oil prices have accelerated their decline in recent trading days, falling from a high of US$130/barrel to around US$100/barrel. As of early morning closing today, WTI crude oil closed down 7.6% at US$95.18/barrel, and Brent crude oil closed down 7.86% at US$98.5/barrel.
“The ups and downs of the crude oil market are mainly due to the current unstable state of market investor sentiment. As the United States and its allies begin to sanction Russian energy exports, the intensity of sanctions against Russia is also close to the maximum. At this time, the emergence of some factors will lead to market expectations When there is a change, market sentiment will reach an inflection point. It can be seen that oil prices began to fall rapidly from highs because the United Arab Emirates suddenly issued a voice urging OPEC+ to speed up production increase. Although the UAE Minister of Energy came forward to deny it the next day, it has already had a great impact on market expectations. Impact. Brent crude oil positions have seen the largest single-week reduction in positions in many years, indicating that high prices have also attracted funds to quickly make profits and leave the market.” said Yang An, head of energy and chemical research and development at Haitong Futures.
Yang An believes that last weekend there was news in the market that the Russia-Ukraine negotiations have made substantial progress. The market is quite looking forward to the significant progress in the fourth round of talks between Russia and Ukraine. This has made funds once again cautious in judging oil prices. You can see this news As a result, oil prices fell directly to the $100/barrel mark. In addition, another reason for the recent sharp decline in oil prices is that the overall risk appetite of the financial market has significantly cooled down. The stock market and commodities have generally fallen. This atmosphere has also amplified the decline in oil prices.
So, does the turnaround in Russia-Ukraine negotiations mean that sanctions imposed by Western countries on Russia will also end? In this regard, Yang An said that although there have been previous statements about “the end of the conflict between Russia and Ukraine, sanctions imposed by the United States and other parties will be lifted”, but currently, as the situation develops, Western countries’ sanctions against Russia are becoming more and more extreme. It is developing in an irreversible direction, which brings huge uncertainty to the subsequent lifting of sanctions. Biden’s latest statement said that the United States aims to end normal trade relations with Russia. All our sanctions and export controls are destroying the Russian economy. This means that even if the conflict between Russia and Ukraine eases, it is estimated that Western sanctions will be difficult to stop immediately. The impact of Russia’s crude oil exports will have a big impact.
After the UAE urged OPEC+ to speed up production increases, causing oil prices to plummet, the UAE’s energy minister came out the next day and stated that he would abide by the OPEC+ agreement and abide by the current monthly production increase plan. “The United Arab Emirates, a country that jumped out to demand an increase in production benchmarks in July last year, is a destabilizing factor within OPEC. The original production reduction cooperation expired in April this year. According to the new production benchmarks reached by OPEC+ in July last year, production can theoretically be increased. , and the agreement raised the OPEC+ production benchmark by more than 1.6 million barrels per day, of which the UAE production base was raised by 350,000 barrels per day. Therefore, if the oil price is still high when the agreement expires in May, it will be free from the constraints of the original agreement. There is a high probability that the UAE will increase production under existing conditions,” Yang An said.
In terms of data, U.S. API crude oil inventories increased by 3.75 million barrels in the week of March 11, API Cushing crude oil inventories increased by 2.308 million barrels that week, API gasoline inventories decreased by 3.794 million barrels that week, and API distillate inventories increased by 888,000 barrels that week. .
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