As the situation between Russia and Ukraine worsened yesterday, international oil prices also exceeded US$100 per barrel. Domestic oil prices are highly linked to international oil prices and have performed well. The price of the main domestic crude oil futures contract has also exceeded 600 yuan/barrel, setting a new high since the product was launched.
In the view of industry insiders, Brent crude oil futures exceeded US$100/barrel for the first time since September 2014. This was an early transaction on the geo-risk premium between Russia and Ukraine in the context of low inventory and low idle production capacity. The recent outbreak of the Ukrainian crisis is a The main factors that have dominated recent oil prices.
“The core factor that currently dominates oil price trends is the tight balance between supply and demand in the crude oil market. Against the backdrop of upward price trends, geopolitical events such as Russia and Ukraine have further amplified price elasticity.” said Zhang Zhengze, a researcher at Guohai Liangshi Futures.
According to Zhang Zhengze, Russia’s crude oil production is normally maintained at 11 million barrels per day, accounting for nearly 12% of global crude oil production, and its exports are around 5 million barrels per day, accounting for nearly 12% of global exports. Exports are relatively concentrated, mainly to the EU and China. Nearly 30% of the EU’s crude oil imports are provided by Russia. Apart from OPEC, Russia is the EU’s largest source of crude oil imports.
“Judging from Russia’s crude oil production, export volume and trade flow, if as the situation further deteriorates, Western countries’ sanctions on Russia are upgraded to the energy field, which will undoubtedly have consequences for the crude oil market that is still in a tight balance between supply and demand. Big impact. Even if the U.S.-Iran negotiations go smoothly and Iran’s crude oil production capacity is released, according to current data, Iran’s future recovery space of around 1 million barrels per day will be a drop in the bucket to fill Russia’s supply gap.” Zhang Zhengze say.
In this regard, Gu Shuangfei, deputy manager of Nanhua Futures Consulting Services Department, believes that in the absence of global crude oil supply elasticity, the deterioration of the situation in Russia and Ukraine will cause disturbances to the crude oil supply side, thereby increasing the risk premium of crude oil.
“Crude oil prices are already at a high premium. In the short term, it is difficult to ease relations between Russia and Ukraine, and crude oil will continue to trade at the current geo-risk premium. However, in the long term, insufficient global production capacity and the recovery of demand in the later stages of the epidemic will still support the strength of oil prices. The main logic.” Gu Shuangfei said.
In his view, low investment, low production capacity, and low inventory in the global crude oil market are the core logic that drives oil prices to strengthen. This structure is difficult to change in the short term. “It is difficult for shale oil to achieve a significant increase in production in the short term. At the same time, the world’s remaining production capacity is increasingly depleted. The remaining production capacity is mainly concentrated in the hands of Saudi Arabia, Iraq, the United Arab Emirates and Iran. OPEC has steadily increased production without any discordant voices. The crude oil market lacks supply elasticity. Frequent geopolitics and natural disasters will significantly increase crude oil premiums.” Gu Shuangfei said, however, if the Iranian nuclear negotiations are passed, it will lead to a deep correction in crude oil. It is expected that crude oil prices will fluctuate widely in the range of 65-120 US dollars per barrel in 2022.
Gao Mingyu, an analyst at SDIC Anxin Futures, said that before the Russia-Ukraine conflict substantively eases, the geo-risk premium will still provide significant support to the oil market. The unilateral price of crude oil and the monthly spread may still be interpreted in a more extreme direction. Investors should Mainly use tools such as call options to avoid the risk of price increases.
“In the medium term, although the IEA and the U.S. Department of Energy have recently raised their crude oil demand expectations, the crude oil market is still expected to enter a storage accumulation cycle of about 440,000 barrels per day from the second quarter. Geographical risks will arise after the geopolitical dispute between Russia and Ukraine has made a substantial breakthrough. The premium is facing restoration, and investors can combine short positions and call options to seize the opportunity of a periodic oil price drop,” Gao Mingyu said.
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