Since October, the crude oil market has seen a fierce battle between long and short. Last Friday, the stock market and commodities staged a dramatic reversal, and last Thursday’s night trading performance was even more exciting. In the past week, macro-level pressure has continued to exert pressure on the commodity market. In addition to being suppressed by the strength of the US dollar and concerns about economic recession, the crude oil market also needs to digest the political game between the United States and OPEC+. For the domestic market, international varieties also face exchange rate issues. , which makes these varieties show obvious differences in the domestic and foreign market. The performance of external commodities is significantly weaker after the strength of the US dollar, while the domestic market has obvious resistance to falling, and the overall performance is a wide oscillation pattern. This state has continued Two months later, there is still no sign of breaking the deadlock.
The crude oil market has fallen back from its highs in the past week, with international oil prices falling by more than 7%. The energy and chemical sector, which has lost cost support, has become the sector with the largest decline in the commodity market. After last Friday’s close, international oil prices closed at a one-week low, although OPEC+ cut production at the beginning of the month. The intensity far exceeded market expectations and pushed up oil prices, but it did not restore market confidence to the strength that supported oil prices to remain high. Under subsequent negative macroeconomic conditions and pressure from the United States, oil prices fell back under pressure.
Before the U.S. midterm elections, the crude oil market has further increased uncertainty, especially the confrontation between the United States and OPEC+, which has injected political gaming factors into oil prices. Although Saudi Arabia said that the decision was entirely based on economic considerations, this obviously angered Biden. government. Senator Chris Coons, a close friend of U.S. President Joe Biden, said Congress may suspend arms sales to Saudi Arabia in response to OPEC+’s decision to cut production. Coons, a member of the Senate Foreign Relations Committee, said the oil production cuts were “a dirty trick” to help Russia “finance their war of aggression against Ukraine.” His speech showed that the Democratic-controlled Congress is increasingly inclined to cut military aid to punish Saudi Arabia for supporting OPEC+ production targets with only about a month left before the U.S. midterm elections. It is conceivable that before the U.S. midterm elections, the Biden administration still has a strong will to suppress oil prices, and relevant measures may be introduced in the future. This is a major test that oil prices still face, and it is also the reason why some investors who are bullish on oil prices are more willing to wait and see. location.
This time OPEC+ cut production by 2 million barrels per day, which has brought support to fragile oil prices. According to OPEC’s latest monthly report for September, the 2 million barrel production reduction plan allocated to reduce production excludes some countries whose production is lower than the target production. , OPEC’s total actual production reduction was 978,000 barrels per day. In addition, according to tests by three-party agencies, Russia, a non-OPEC member, will not take the initiative to further reduce production due to sanctions that have caused its production to fall below the production reduction target. However, Kazakhstan and other countries have production reduction tasks of about 100,000 barrels per day, so the actual situation of the entire OPEC+ The production reduction is basically in line with Saudi Energy Minister Abdul Aziz’s estimate of 1.1 million barrels per day. According to the current production reduction plan, this production reduction is likely to exceed 1 million barrels per day. All agencies have also significantly adjusted the supply and demand balance sheet of the crude oil market after the OPEC+ production reduction, and the pressure of oversupply in the crude oil market has been significantly alleviated. It is necessary to track the market’s reaction after the actual implementation of OPEC+ production cuts starting in November. It is expected that the positive effect of production cuts on oil prices will still be exerted over time in the following months.
Although OPEC+’s production cuts once pushed oil prices to five consecutive positives, the factors affecting oil prices are not limited to the supply side. With U.S. CPI data once again exceeding expectations, the Federal Reserve’s continued sharp increase in interest rates by 75 basis points in November has once again become a certainty. , while the downward pressure on the global economy continues to put pressure on global risk assets, OPEC+ also stated in its monthly report that amid intensifying challenges such as high inflation and tightening monetary policies by major central banks, global economic growth has entered a period of serious uncertainty. During this period, macroeconomic conditions continued to deteriorate. Against this background, oil prices have fallen sharply in the past week. It is obvious that the demand side is the foundation for the rise in oil prices. Based on the current situation, both the International Energy Agency and EIA have maintained cautious judgments on crude oil market demand in 2023. In particular, EIA predicts that crude oil demand growth next year is only 1.48 million barrels per day, which also means that the crude oil market will recover at a substantial pace next year. Slow down.
The latest weekly data released by the EIA showed that U.S. commercial crude oil inventories excluding strategic reserves increased much more than expected in the week ending October 7, while refined oil inventories significantly ahead of expectations, while gasoline inventories fell ahead of expectations. Specific data shows that the EIA crude oil inventory changes in the United States in the week ending October 7 actually increased by 9.88 million barrels, an increase of 175 barrels was expected, and the previous value decreased by 1.356 million barrels. Gasoline inventories actually reported an increase of 2.023 million barrels, compared with a decrease of 2.422 million barrels from the previous value; refined oil inventories actually reported a decrease of 4.853 million barrels, compared with a decrease of 2.892 million barrels from the previous value. Crude oil imports were 6.063 million barrels per day, an increase of 116,000 barrels per day from the previous week. U.S. crude oil exports fell by 1.679 million barrels per day that week to 2.872 million barrels per day. The four-week average supply of U.S. crude oil products was 19.952 million barrels per day, a decrease of 3.77% from the same period last year. U.S. domestic crude oil production fell by 100,000 barrels in the week of October 7 to 11.90 million barrels per day. The U.S. Strategic Petroleum Reserve (SPR) inventory decreased by 7.690 million barrels to 408.7 million barrels in the week of October 7, a decrease of 1.85%. U.S. domestic crude oil production for the week ended October 7� is the lowest since the week of July 15, 2022. EIA commercial crude oil inventories for the week were the highest since the week of July 30, 2021.
The sharp increase in crude oil inventories was mainly due to the sharp decline in exports. In addition, the capacity utilization rate of U.S. refineries will fall as autumn maintenance work is fully launched. Refined oil inventories recorded the largest decline since the week of March 4, 2022. Analysis found that strong demand for diesel in the United States hit a new high in more than three months, while the supply of refined oil in Europe was tight due to strikes by French petrochemical workers and other factors, which further Fueling the strength in the diesel market, the spread between diesel and gasoline is expected to widen this winter due to seasonality and refiners ramping up diesel production, which could lead to a gasoline glut along the Gulf Coast, according to agency outlooks. In addition, while the U.S. refining processing volume is declining, the crude oil processing volume of Chinese refineries has officially returned to the level at the beginning of the year, which has improved the performance of the crude oil demand side. For a long time, the sluggish demand in the Chinese market had dragged down the performance of the crude oil demand side. After October, local refining operations significantly increased their operating rates, and the national oil refining volume returned to normal levels.
Inspired by OPEC+ production cuts, many investors have begun to go long in crude oil again. According to the latest CFTC position data, the net long position of NYMEX WTI crude oil increased by 19,305 contracts to 208,666 contracts, hitting a new high in the last 11 weeks. According to ICE data from the Intercontinental Exchange, speculative net long positions in Brent crude oil futures increased by 15,831 lots last week to 201,163 lots, a new high in the past 16 weeks. After oil prices continued to fall last week, I believe more and more investors will be more cautious about long oil prices. At the macro level, the Fed’s imposed interest rate path and the downward pressure on the economies of Europe and emerging countries have kept market confidence low. Against the background of a strong US dollar, the pattern of risk assets falling easily but not rising remains difficult to change. The influencing factors facing the crude oil market are very complex at present. The influence of long and short factors such as production cuts and interest rate increases is strong enough. It can be expected that in the context of the game between long and short parties, oil prices will remain highly volatile and transaction difficulty will increase significantly. Investors should remain patient.
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