After plunging more than 10% from its high on Wednesday, international oil prices rebounded briefly on Thursday, but the gains failed to be maintained and they still closed down. As of the close, the main contract of WTI crude oil fell by 2.5%, and the main contract of Brent crude oil fell by 1.6%. On March 10, local time, U.S. Treasury Secretary Yellen said that the United States and its allies were considering imposing additional sanctions on Russia. On the same day, the energy ministers of the Group of Seven countries held a special conference call to discuss energy issues. The energy ministers of the Group of Seven countries all agreed that energy sources should be diversified quickly, including nuclear energy, and “some countries need to quickly reduce their dependence on Russian energy.”
Recently, as the conflict between Russia and Ukraine has eased slightly, Ukrainian President Zelenskiy has expressed his sincerity in negotiations, coupled with statements from the United Arab Emirates and other countries about accelerating production increases, further cooling market sentiment. On Thursday, SC crude oil fell by the limit, and high and low sulfur fuel oil, LPG and other varieties suffered heavy losses.
Li Yunxu, a crude oil analyst at SDIC Essence Futures, told a reporter from Futures Daily that from the current point of view, supply factors are the core influence on oil prices. The geopolitical disturbance caused by the conflict between Russia and Ukraine has led to a swing in expectations for Russian oil product exports to be hindered, and has evolved into a Russian oil spot trade. Proactive volume reduction amid Black Sea security and sanctions concerns.
“There is still a certain degree of uncertainty in the supply of Russian crude oil.” According to Zheng Mengqi, a researcher at Hizheng Futures, although Germany opposes the ban on the import of Russian crude oil into the port and the EU’s ban on Sberbank’s access to SWIFT, both Russia and Ukraine have There is a willingness to de-escalate, but the Russia-Ukraine conflict has not yet been completely resolved.
In addition, Zheng Mengqi said that the negotiations on the Iranian nuclear agreement have not yet come to fruition. Saudi Arabia and the United Arab Emirates also have their own attitudes towards the nuclear agreement. The return of Iranian crude oil to the market still needs further tracking. On the one hand, the UAE is calling on OPEC to increase production, and on the other hand, it has stated that it will abide by the production reduction agreement. OPEC has a strong willingness to raise the price of crude oil. Saudi Arabia and the United Arab Emirates are countries with relatively sufficient idle production capacity in OPEC, with about 4 million barrels per day. If we assume the most pessimistic scenario of the Russia-Ukraine conflict, fully activating and releasing Iranian crude oil may make up for the Russian crude oil gap, but in this way It also brings great risks to the supply side.
In addition, the reporter learned that the U.S. government recently offered to import Venezuelan crude oil in exchange for relaxing economic sanctions on Venezuela. In this regard, Zheng Mengqi believes that due to Venezuela’s own domestic economic and political problems, it is difficult for Venezuela’s crude oil production to expand significantly in the short term, which will do little to make up for the shortfall in Russian crude oil.
Regarding the current supply decline of Russian oil, Li Yunxu believes that there are two main ways to alleviate the short-term gap: one is the normalization of Russian crude oil exports, and the other is OPEC oil-producing countries to accelerate production increases. The former focuses on the expected difference, while the latter focuses on the time difference.
“Specifically, crude oil is still in the midst of extreme fluctuations dominated by geopolitical expectations. If Russia’s supply disruption continues, in the short term we mainly rely on OPEC+ countries that actively reduce production to accelerate production increases, which is expected to be 2 million barrels per day, and in the medium term, Iran’s production will be released It can further make up for about 1.5 million barrels per day in the future. The amount of Russian exports blocked and the timing of production increases in related countries are the key to determining the rhythm of market fluctuations in the later period.” Li Yunxu said.
Looking forward to the market outlook, Zheng Mengqi said that after giving back part of the risk premium, oil prices may remain high until the Russia-Ukraine conflict is resolved. From the current point of view, the market has begun to treat the Russia-Ukraine conflict rationally, and subsequent crude oil prices will fluctuate following issues such as the Russia-Ukraine conflict, negotiations on the Iranian nuclear agreement, and OPEC production. In the current situation where market price fluctuations are constantly amplified by geo-political risks, investors are advised to pay attention to risk control and operate with light positions.
In Li Yunxu’s view, in the current extremely volatile market, market participants pay attention to the profit-loss ratio under different situations, and it is more important to make arrangements based on risk tolerance. For participants in the industry chain, the high oil prices in far-month contracts have provided good value preservation opportunities for the upstream; the extreme strength of overseas crack spreads has also provided refineries with overseas benchmark price-denominated products with opportunities to lock in profits; for For domestic refineries, in the context of still huge oil price risks and refining profits facing further squeeze, it is still necessary to use callbacks to deploy long allocations to avoid risks; and for ordinary investors, the current conflict between Russia and Ukraine is on the margins of easing. However, under the background that concerns about crude oil supply are difficult to subside, high and wide price oscillations may be a more likely interpretation. Under high volatility, it is even more necessary to reasonably assess risk tolerance, try to avoid excessive unilateral exposure when holding positions, and do a good job Position control.
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