Starting from the early morning of January 21st, Beijing time, oil prices fell rapidly by nearly US$4.5/barrel within 8 hours. This extreme performance shows that the market has accumulated a lot of floating chips, which has caused market instability. Here, In the past half month, international oil prices have increased by as much as 15%, and Brent crude oil has reached a new high since 2014, which has aroused great concern from all parties. It’s not just crude oil that is strong. In fact, bulk commodities have performed very strongly recently, with many varieties performing eye-catchingly. Tin continues to set new historical highs, and nickel also broke through 10-year highs. The rise in prices of many commodities is related to the fact that inventories are currently at multi-year lows, and is also directly related to the severe inflationary pressure in the United States, Europe and other places. Institutions, including major international investment banks, have made very clear judgments on commodities. Compared with other risky assets such as the stock market, commodities are more valuable to buy. In this atmosphere dominated by macro factors, a series of geopolitical events have created a tense atmosphere. The crude oil market has also received heavy buying from bulls in the past period. The speculative net long positions of WTI and Brent crude oil have both refreshed. A new high in more than 2 months.
Although oil prices fell rapidly on Friday, the selling pressure gradually subsided and recovered most of the losses on the same day. The overall strong pattern has not substantially changed. This sharp drop is more of a correction of the previous overbought, and oil prices turned The weak window has not yet arrived.
The crude oil market supply and demand forecast in 2022 is still very flexible
This week, OPEC and the International Energy Agency released their monthly reports for January respectively, agreeing that the impact of the Omicron strain on crude oil market demand was weaker than expected. As time goes by, the global panic about the destructive power of the Omicron mutant strain has basically subsided, and countries such as the United Kingdom and Spain have begun to lift epidemic control. As the influence of mutated virus strains weakens, major institutions have further optimistic outlook for crude oil demand in 2022. OPEC maintains its judgment that demand will grow by 4.2 million barrels per day this year, and the International Energy Agency raised global oil demand in 2022 from last month. It is estimated that demand will increase by 3.3 million barrels per day in 2022 and is expected to reach the pre-epidemic level of 99.7 million barrels per day. Global oil demand this year will exceed the pre-epidemic level. Previously, the EIA also raised its forecast for crude oil demand in 2022, predicting global crude oil demand growth to be 3.62 million barrels per day, compared with the previous estimate of 3.55 million barrels per day.
On the supply side, the current outlook of major institutions is still very different. Some institutions are concerned that the lack of investment on the supply side for several consecutive years may lead to a supply gap. The International Energy Agency predicts that if oil supply rises steadily, there may be a large surplus in the first quarter of 2022 and in the future, because the oil production of the United States, Canada and Brazil is expected to reach new highs this year, and the production of Saudi Arabia and Russia may also break records. . If OPEC+ completely cancels production reduction measures, global oil supply may increase by 6.2 million barrels per day in 2022, of which OPEC+ production may increase by 4.4 million barrels per day, and non-OPEC+ production may increase by 1.8 million barrels per day.
However, the International Energy Agency also stated that supply is tighter than expected at the current stage, and OPEC+ only achieved 60% of its production increase plan in December last year. It is reported that the implementation rate of the OPEC+ production reduction agreement in December last year rose to about 122%. Nigeria, Angola, Malaysia, and Russia have not completed their production increase targets. Supply is tighter than expected. Demand is still resilient despite the epidemic, coupled with geopolitical trends. The supply situation has become more fragile. With commercial oil and fuel inventories in OECD members at seven-year lows, any reduction in supply could make the oil market volatile in 2022.
This is indeed the case at present. Low crude oil inventories around the world have made investors more worried about the stability of supply. Although high-frequency data released by EIA in the past few weeks show that the U.S. oil product market has exceeded expectations for several consecutive weeks, this has not put much pressure on oil prices. Even the most recent EIA weekly report showed that crude oil inventory accumulation exceeded expectations. After that, oil prices continued to rise, which showed that the current crude oil inventory is at a seven-year low, putting less pressure on oil prices. Investors are not too concerned about some negative factors in the supply and demand of the crude oil market. Obviously, crude oil inventories will continue to rise for some time. It is possible to rekindle investors’ concerns about oversupply.
Geopolitical factors push up oil prices
The weaker-than-expected impact of the epidemic on demand and the ineffective growth of OPEC+ have laid the foundation for stronger oil prices. However, the direct trigger for such strong oil prices is the recent frequent geo-risk events. Libya once lost nearly 500,000 barrels per day of production due to oil field blockades and production shutdowns for maintenance. It was only recently that production gradually recovered. The ongoing friction between NATO and Russia surrounding the Ukraine issue has caused market concerns several times. Kazakhstan ranks 13th in the world in crude oil productionThe market was also shocked by the civil strife in Tanzania, which was also interspersed with emergencies such as Yemen’s Houthi armed forces attacking Saudi Arabia and the United Arab Emirates’ oil facilities, and Turkish oil pipeline explosions. It is rare for so many geopolitical events to occur consecutively in the crude oil market in just one month. This has made investors highly nervous. Concerns about supply stability continue to rise, constantly injecting risk premiums into oil prices, and driving oil prices to rise sharply. .
In addition, in the demand for allocation of major categories of assets, international capital believes that commodities are undervalued relative to risky assets such as the stock market. Against the background of intensifying inflationary pressure in overseas markets, some professional institutions, including funds, have increased their exposure to commodities. configuration. Data released by the U.S. Commodity Futures Trading Commission (CFTC) shows that in the week ending January 18, the net long position of WTI crude oil held by speculators increased by 23,770 lots to 311,596 lots. Data released by the Intercontinental Exchange (ICE) showed that the number of net long positions in Brent crude oil held by speculators in the week ended January 18 was the highest in the past ten weeks. Compared with the overheating situation in overseas markets, although my country’s SC crude oil also has obvious signs of increasing positions, its performance better reflects the supply and demand situation of the domestic crude oil industry. The increase is significantly weaker than that of the international market, and it is nearly 2 US dollars less than Brent crude oil in the same period. /bucket.
Overall, the commodity market is still in a stage of relatively high risk appetite. Various institutions continue to raise their target prices for crude oil and other commodities. If conditions match, there is still energy to go higher. However, we also remind investors that as the Chinese Lunar New Year approaches, commodities with large cumulative gains are prone to significant fluctuations. For crude oil, although the current market focus is still focused on some bullish factors, in fact, the U.S. oil product market has begun to experience phenomena such as full-scale inventory accumulation that exceeds expectations, and the assessment of supply and demand may change again at any time. This is also a need Pay attention to the risk points.
</p
