Oil prices fell as the rapid spread of the Omicron mutant strain dimmed the outlook for oil demand! On Monday, international oil prices fell sharply, with the main WTI crude oil contract falling by more than 6% at one point, and the closing decline narrowed to about 2%.
The demand side weakens and the pressure on the crude oil market increases sharply
On Monday, international oil prices first fell and then rose, performing a “V-shaped” reversal. The main WTI crude oil contract once fell by more than 6% during the session. In terms of internal trading, as of yesterday afternoon’s closing, the main SC crude oil contract fell 4.23% to close at 450.5 yuan; the main high-sulfur fuel oil contract dropped sharply by 5.17% to close at 2,568 yuan; the main low-sulfur fuel oil contract fell 5.10% to close at 2,568 yuan. Received 3332 yuan. During the night trading session, the main SC crude oil contract first fell and then rose, closing down 2.99% this morning, after falling 4.71% previously.
Regarding the sharp drop in crude oil on Monday, industry insiders generally believe that it is mainly due to the spread of the Omicron mutant strain around the world, which has had a certain impact on the demand side of crude oil.
“Last weekend, the Omicron mutant strain spread rapidly in Europe. As Christmas is approaching, the Netherlands, Germany, and Ireland successively announced tightened epidemic prevention measures, and London entered a state of ‘major incident.’ The Omicron mutant strain has a global impact The impact on economic growth and crude oil demand is still continuing.” Liu Shunchang, an analyst at Nanhua Futures, said that last week, the IEA lowered the crude oil demand growth rate in 2021 and 2022 by 100,000 barrels per day in its December crude oil outlook, indicating that global crude oil in December this year The market has entered the oversupply stage, and based on the current OPEC+ production increase pace, there will be a surplus of 1.7 million barrels per day in the first quarter of 2022, and a surplus of 2 million barrels per day in the second quarter of 2022. As time goes by, the pressure of oversupply in the global crude oil market continues to increase, and the recent accelerated flattening of the crude oil forward curve is a reflection of this pessimistic expectation.
It is worth mentioning that Brent crude oil rebounded from around US$66/barrel to the key resistance level of US$75-76/barrel in the early period. During this period, the fundamentals of oversupply in the global crude oil market did not change, and the forward curve continued to flatten. , the rebound in oil prices is more of a recovery from the extreme pessimism after the crash. The current weakness in crude oil in the external market continues, driving crude oil futures prices lower in the internal market.
“Currently, the core logic that dominates the crude oil market is the weakening of the demand side, including the impact of the Omicron variant strain on global economic growth and crude oil demand, as well as the continued advancement of expectations for tightening of the Federal Reserve’s monetary policy, the real interest rate of U.S. Treasury bonds Bottoming out will have an impact on the financial market and commodities.” Liu Shunchang said that currently, Brent crude oil is around US$70 per barrel, and OPEC+ is not very motivated to give up increasing production. Under this situation, the global crude oil balance sheet is accelerating towards oversupply, and oil prices are facing continued downward pressure. In addition, the market’s probability of the Federal Reserve raising interest rates in March next year has risen to 40%, and U.S. dollar liquidity continues to tighten, supporting the rise of the U.S. dollar exchange rate and suppressing oil prices to a certain extent.
“Oil prices have been operating at a rhythm of repeated oscillations since December, falling sharply and then rising sharply, and market sentiment switches frequently. We are not optimistic about the market in the first quarter of next year. Next year’s annual supply and demand balance sheet may reverse, that is, the market will change from monthly to monthly “The supply shortage turns to oversupply, and it is only a matter of time before crude oil storage becomes overstocked.” Zhong Meiyan, energy and chemical director of Everbright Futures, said that it is estimated that crude oil will be in excess in 2022, with an excess supply of 2.17 million barrels per day.
In Zhong Meiyan’s view, in 2022, the market will fluctuate around multi-dimensional factors such as the time-point impact of the new coronavirus mutant strain on demand, the timeline of the Federal Reserve’s interest rate hike policy, and disturbances from geographical factors. The overall oil price will be low and then high. The probability is higher. “The increase in production and inventory accumulation are ahead of expectations. Under the expectation of contraction of inflation, oil prices were under pressure in the first half of the year, while prices in the second half of the year depend on demand variables, and the full-year trend is expected to be ‘V-shaped.'” Zhong Meiyan said.
The cost side has plummeted, and the energy chemical sector has been affected and declined.
Concerns about the global epidemic have grown, the EIA has lowered its demand forecast for next year, and oil prices have continued to be weak since early November. The sharp correction in cost-end crude oil has also caused the domestic energy and chemical sector to weaken significantly. Among them, high and low sulfur fuel oil fell by 5%, LPG fell by more than 4%, and PTA fell by more than 3%. In the view of industry insiders, the weakening prices of energy and chemical sector products more reflect the downward shift in the cost center and the restructuring of petrochemical prices.
The recent stocking situation is average, and the fuel oil spot itself is not driven strongly. Longzhong data shows that Singapore’s high-sulfur 380 fuel oil was quoted at US$414.41/ton last Friday, down US$1.76/ton. According to Galaxy Futures statistics, on the one hand, Singapore’s fuel oil imports fell 36% month-on-month to 634,000 tons last week, of which imports from Russia and Africa dropped to zero, with import contributions mainly coming from Europe and the Middle East; on the other hand, Singapore’s fuel oil imports last week Export volume fell 63% month-on-month to 129,000 tons, and cargo shipments to other Asian countries dropped to zero. Amid a decline in imports and exports, Singapore’s onshore fuel oil inventories rose 1.41% month-on-month to 20.93 million barrels or 3.29 million barrels.�.
“From the perspective of the liquefied gas market itself, the impact of the epidemic and the weak consumption data in November show that it is difficult to improve gas consumption at the end of the year. At the same time, the international market has a greater impact on domestic terminal sentiment after the sharp decline, and LPG futures continue to run at low levels. Upward pressure has further intensified,” said Li Zuzhi, analyst at SDIC Essence Futures.
“There are two reasons for the weakness of LPG: on the one hand, the weakness of crude oil has suppressed it; on the other hand, its own supply and demand situation is not very optimistic, especially the weak demand side.” Zhang Zhengze, a researcher at Guohai Liangshi Futures, said, Since December, the domestic temperature has been higher than in previous years. The cold winter expected by La Niña has not materialized yet, and the civilian demand for LPG is not good.
In addition, natural gas prices soared before November this year, and liquefied gas partially replaced the demand for natural gas. “According to our visits and surveys, about 20% of natural gas demand may switch to liquefied gas. With the sharp drop in natural gas prices, the market is worried that this part of the demand will return to the natural gas market again.” Zhang Zhengze said.
According to Li Zuzhi, at present, because LPG is in a deep discount pattern, the marginal change affecting the market mainly lies in the short-term domestic spot price and the continued contraction of imported gas as the validity period of the warehouse receipt approaches, which supports the domestic market. He believes that the downside risk of spot prices has increased in the near future, and the futures discount on the market has widened slightly again after continuing to converge before. The subsequent release of risks on the spot side will affect whether the market trend can further weaken.
“With the current overall chemical consumption remaining stable, the LPG market outlook is mainly focused on whether gas consumption can provide strong support for domestically produced gas after the domestic temperature drops at the end of the year. In addition, after the U.S. market continues to weaken, recent temperature forecasts and inventories have shown a turning trend. , whether it can support a rebound in international market prices is also worthy of attention.” Li Zuzhi said.
Zhu Lihang, an analyst at Zheshang Futures, said that the correlation between PTA and crude oil has always been relatively strong. Coupled with the recent low profits of the entire industry chain, PTA prices and crude oil will show a stronger correlation. Once cost-side oil prices fall sharply, PTA prices will inevitably fall back sharply.
“From the perspective of PTA fundamentals, PTA equipment maintenance remained at a high level in December, and the basis was relatively strong under the destocking pattern. However, affected by factors such as the epidemic in many places in East China, weak demand, insufficient natural gas, and local environmental inspections, the gathering Some areas of ester and terminals are on holiday ahead of schedule, and the load is further reduced.” Tianfeng Futures analyst Liu Siqi said that the market is expected to enter the seasonal off-season of demand from January to February next year, and the PTA supply and demand pattern is facing seasonal accumulation pressure. In terms of cost and supply and demand, Against the backdrop of double weakness, PTA oscillated down.
In Zhu Lihang’s view, the short-term PTA supply and demand pattern cannot be effectively alleviated, and destocking solely relying on large-scale maintenance on the supply side cannot be sustained. In the absence of significant improvement on the demand side, PTA is still driven by the cost side.
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