There has been a lot of news in the crude oil market recently, but there is still a lack of guidance on important events. As of February 9, after three consecutive days of rising international oil prices, traders took profits and closed lower. Brent crude oil futures fell by US$0.59/barrel to US$84.50/barrel. Let’s take a look at the latest market hot spots:
1. The number of people filing for unemployment benefits in the United States increased, but is still at a historically low level.
On Thursday night, the United States announced that 196,000 people filed for unemployment benefits in the week to February 4, a new high since the week of January 7, 2023. But in fact, although the number of initial jobless claims in the United States has increased, it is still at a historically low level, highlighting the resilience of the job market.
Summary: In a relatively stable employment environment, the Federal Reserve may continue to aggressively raise interest rates to cool inflation, which has triggered market concerns and put pressure on risky assets such as crude oil futures and stocks.
2. The Federal Reserve’s policy of raising interest rates and reducing inflation remains unchanged, and oil prices will remain under pressure in the medium term.
The U.S. dollar index was 102.74 on Thursday, down 0.7% from the previous month. The U.S. dollar exchange rate has fallen across the board, U.S. bond yields have fallen, and some industry players believe that the Federal Reserve will not significantly raise interest rates now that inflation has begun to be brought under control. However, Fed Barkin said the Fed needs to “stay the course” in controlling inflation and cannot take it for granted that the decline in inflation in the past three months can be sustained. There is a long way to go to fight inflation. And although inflation in the euro zone is also falling, this did not prevent the European Central Bank from raising borrowing costs by another 50 basis points last week and even signaled that it would continue to raise interest rates by 50 basis points in March.
Summary: In fact, the Fed’s interest rate hike may not end as the market expects. The Fed’s policy of raising interest rates to fight inflation has not changed, and a large interest rate hike in Europe is also a high probability event. Oil prices will still be affected by the tightening of European and American monetary policies in the medium term. Negative impact.
3. Frequent crude oil supply interruptions will support oil prices in the short term.
Crude oil exports have not fully recovered after the earthquake in Türkiye. Turkey suffered two strong earthquakes on Monday. Turkey announced the suspension of crude oil shipments to the Ceyhan port and ordered the resumption of port operations on Tuesday. On Wednesday, Iraq’s National Oil Co. said crude oil exports were gradually recovering. But Azerbaijan’s crude oil exports through Turkey’s southern port of Ceyhan are not expected to resume until late next week, people familiar with the matter said on Thursday. As an important crude oil export port in Turkey, Ceyhan Port has an export volume of approximately 950,000-1 million barrels per day. Port operators said that the BTC export terminal is unlikely to resume shipments before next week. In addition, Kazakhstan oil fields and Norwegian oil fields have both reduced production due to maintenance. The three regions have a total export of about 2.7 million barrels per day, and the production reduction this week has reached about 50%.
Summary: Oil prices will be supported in the short term until normal crude oil supply is restored in the three regions.
To sum up, the current international crude oil market is still a game between macroeconomics and supply and demand. Crude oil prices found support amid a temporary decline in crude oil exports from major oil-producing regions. However, changes in the direction of the Federal Reserve and U.S. Treasuries have caused the market to re-examine macroeconomic risks, and concerns have resurfaced. At present, the market should focus on the January CPI data to be released by the United States on February 14. Changes in CPI data will have a key impact on international crude oil prices. Therefore, in the short term, it is expected that oil prices may still fluctuate mainly within a narrow range.
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