Last week, crude oil prices seemed calm on the surface, but in fact the logic behind it changed very quickly. After the natural gas shortage in Europe is expected to have eased, the market’s focus will return to fundamentals and the epidemic. However, the current fundamentals are not in a strong stage, and the epidemic’s spread time is currently relatively long. There is still no sign of With the emergence of an inflection point, short-term oil price fluctuations are expected to intensify.
Crude oil inventories decline, but the turning point of the epidemic has not yet appeared
Last week’s EIA data showed that U.S. crude oil inventories fell by 4.71 million barrels, the largest weekly decline since mid-September; refined oil inventories increased by 400,000 barrels, and gasoline inventories increased by 5.53 million barrels, the largest weekly increase since early June; Full-bore inventories increased by 1.2 million barrels. In addition, U.S. strategic reserve inventories fell to their lowest level since 2003, and U.S. crude oil production fell by 100,000 barrels last week. Overall, the U.S. market is still in a seasonal rhythm. Crude oil inventories maintain a slight seasonal destocking at the end of the year, and refined oil inventories continue to accumulate at the end of the year. However, from a seasonal perspective, the accumulation period of gasoline inventories at the beginning of the year is relatively short, and usually enters the seasonal destocking stage in the middle to late first quarter, while the accumulation stage of crude oil inventories lasts until May.
Of course, if we look at this year’s trends, it actually doesn’t take long for crude oil to accumulate in storage. There is only a period of accumulation in March and April, and the rest of the time is in the stage of destocking. This is also the reason why crude oil prices will be in 2021. One of the reasons why it remains strong this year. How inventories will perform next year depends on global crude oil demand.
On the demand side, we must pay close attention to the development of the epidemic. Judging from the recent situation, there is still no turning point in the number of new confirmed cases worldwide. The latest data shows that the number of new confirmed cases worldwide has exceeded 700,000, an increase of 80,000 from the previous week. The high point of this wave of epidemic has exceeded has exceeded the Delta virus period, and the rapid growth of new confirmed cases has also exceeded the Delta period, which shows that the pressure of this wave of epidemic is not as easy as imagined. It’s just that among many events, the factor of the epidemic has been buried by the market. If the inflection point of global new additions has not appeared in the past two weeks, then this round of new additions will be long enough, and it is not ruled out that the market will re-recognize Omic. Rong’s influence.
Supply disruptions and Russia-EU conflict
The war in Libya once again affected the supply of crude oil market, and also affected the development of market sentiment. As crude oil prices fell to US$70/barrel, the timely news from Libya made oil price bulls completely excited. According to reports, Libya’s largest Sharara oil field was temporarily closed after the army shut down the oil pipeline. The Libyan National Oil Company announced that the country’s crude oil production has dropped by more than 300,000 barrels per day. Crude oil exports at Zawia and Mellitah terminals have been affected by force majeure and have been suspended. The war-torn Libya has once again given bulls an opportunity. The problem in Libya is not sudden. There have been many situations where oil fields were occupied or ports were blocked in Libya before, but they were all resolved in a relatively short period of time. Therefore, we do not expect that the Libyan problem will have an impact on oil prices. It will have a greater impact and the market will return to normal logic after a short period of fermentation.
The conflict between Russia and NATO also directly led to the strong price of crude oil. Under constant pressure from NATO, Russia was unable to retreat and launched counterattacks in the direction of Belarus and Ukraine. Russia even deployed troops on the Ukrainian border. In response to the threat from NATO, Russia even stated that it would take over Ukraine if necessary.
In addition to the military aspect, Russia began to use natural gas weapons. After Germany delayed the certification of Nord Stream 2 and NATO exerted maximum pressure, Russia began to reduce gas supplies to Europe. According to reports, traffic at metering points on the German-Polish border dropped from an average of 10 million on Friday and about 12 million on Thursday to 1.2174 million kilowatt-hours/hour, only one-tenth of the previous level. Now the electricity price in Europe has reached a new high. Due to nuclear power outages, natural gas shortages and other reasons, the benchmark electricity price has reached 269 euros/MWh, which is about 2 yuan per kilowatt hour. To make matters worse, Germany will shut down nearly 50% of its nuclear power before the end of the year. Last week, France suspended four nuclear reactors due to unplanned construction, making supply even tighter.
ABN Amro said the situation will last a bit longer and may not end before the end of winter. The current shortage’s impact on prices is likely to last longer. Now Russia has only closed the pipeline to Belarus.Europe can no longer bear it. If Russia closes the pipeline to Ukraine again, the crisis will definitely escalate further. Therefore, we must pay attention not only to the relationship between Russia and Europe, but also to the dynamics in the direction of Russia and Ukraine.
By extension, negotiations on the Iranian nuclear issue will also be shelved, and Iran will continue to drag the United States and Europe. Therefore, the issue of the return of Iranian crude oil production will be shelved in the short term. Recently, the United States and Europe have begun to intimidate Iran to return to the negotiating table as soon as possible. But for Iran, if Western countries do not solve the problem of two-front warfare, Iran has reason to believe that it will gain more bargaining chips in the future. Although Europe and the United States have a loud voice, but they may also be afraid of actually taking action. A two-front war has already made it difficult for the United States and Europe to cope. A third-line war will slow down their own pace. Therefore, Iran also understands this, and the short-term Iran nuclear agreement will still be on hold, waiting for the East-West confrontation to ease or Western countries to offer a higher price.
For Russia, Iran is an important bargaining chip in Russia’s hands. Before the US-Russia video conference, Iran had been dragging the United States in order to gain more room for negotiation. However, Biden did not give any face or make any concessions. Therefore, the result of that US-Russia meeting was not ideal. Now the United States and Russia are seeking a new round of meetings. This is the stage for further competition between the two sides. Therefore, before Russia gets the results it wants, there is a high probability that the Iran issue will not be completely resolved.
As for oil prices, since the Iranian problem will not be solved in the short term, and Europe and Russia are unwilling to give in, making the short-term situation more irreconcilable, it now depends on which side can persist to the end in this confrontation. From Russia’s perspective, although there are not many means available to Putin, natural gas and cold winter alone can make Europe uncomfortable in the short term. In addition, China has also continued to support Russia at the Western Pacific level, and China Rare Earth Group has also succeeded After being approved, China is preparing for a comprehensive showdown with the United States at all levels, and the power behind Putin can still support Russia’s toughness.
Judging from recent performance, Germany seems to be regressing. The new German Prime Minister said that he will unswervingly promote the Nord Stream 2 project, which is different from the previous statements of the German Foreign Minister. On Thursday night, European natural gas prices fell sharply, but crude oil prices seemed to have no major reaction due to the approaching Christmas holiday. Instead, bulls once again pushed prices to near the important early pressure level.
Therefore, the geopolitical crisis and uncertainty in Ukraine have made the short-term trend of oil prices more difficult to predict, and the European energy crisis has made crude oil price short sellers wary, so we have also seen the strength of crude oil prices recently, with Brent returning to to above US$75/barrel, the main logic of the market has now shifted from various issues caused by geopolitics. It is expected that the market will re-focus on fundamentals and the fermentation of the epidemic, so the recent market fluctuations may be relatively violent. , positions need to be treated with caution.
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