During the Spring Festival holiday, U.S. soybeans, crude oil, and U.S. cotton dominate the list!
The “two brothers” of US oil and Brent oil handed over their “hot answers” during the Spring Festival holiday.
On the news, according to CCTV News, on February 4, local time, as negotiations to resume the 2015 Iran nuclear agreement entered a critical stage, the Biden administration decided to lift some relevant sanctions against Iran. According to the Associated Press, as U.S. negotiators returned to Vienna for talks on the Iran nuclear deal, U.S. Secretary of State Antony Blinken signed several sanctions waivers related to Iran’s civilian nuclear activities. Countries and companies planning non-military parts of cooperation.
In addition, on the evening of February 4, the U.S. non-farm payrolls increased by 467,000 in January after seasonally adjustment, significantly exceeding the expected increase of 150,000, which was the largest increase since October last year. The U.S. unemployment rate in January recorded 4%. , also exceeding expectations of 3.6%, the first rebound since June 2021. After the data was released, the 10-year U.S. Treasury yield fell above the 1.9% mark.
Last week, Brent crude oil futures rose more than 4%, hitting the highest level since October 2014 at US$93.70 per barrel earlier on the 5th. WTI crude oil futures rose more than 5%, rising for the seventh consecutive week.
Yang Jiaming, crude oil analyst at CITIC Futures, said that in the macro market, U.S. stocks and Bitcoin surged higher and fell, the yield on ten bonds exceeded 1.9%, inflation-protected bonds rose sharply, and gold fell, all due to the hawkish stance of the Federal Reserve’s interest rate meeting, which expressed concerns about excessive inflation. , monetary means suppress demand and thereby alleviate the problem of high prices, and the Governor of Canada also supports raising interest rates. Historically, crude oil prices deviated from the macro trend mostly due to problems on the supply side. The supply measures adopted by the United States include the Iran nuclear agreement, dumping reserves, and calling on OPEC to increase production, but all failed. Crude oil prices were affected by OPEC production growth that was lower than expected, and geopolitical tensions between Russia and Ukraine. The supply side of the conflict continues to be strong, resulting in the U.S. Treasury yields being highly correlated with oil prices. Because oil prices are supported by the supply side, the continued rise drives inflation expectations higher, and interest rate hikes suppress demand. The market may believe that geopolitical conflicts will disrupt supply in the short term. It is difficult to suppress crude oil prices against the backdrop of Bond prices continued to fall, and risk aversion drove funds to continue to pour into crude oil. However, rising interest rates will eventually curb demand for crude oil, and expectations of rising interest rates will drive a rapid rise in near-end bond yields, and oil prices will eventually fall.
“Due to huge differences, the geopolitical conflict in Ukraine does not rule out further intensification, but the two sides are still negotiating. Russia has received a written reply from the United States on security guarantees. If the conflict does not further intensify, this stage may be the most tense moment. Russia said Iran Crude oil will return in March, exceeding market expectations, and OPEC maintains a production increase of 400,000 barrels per day, and supply continues to return. Be wary of a fall in crude oil prices caused by a drop in risk premiums. After all, the impact on the supply side is destined to be short-lived.” Yang Jiaming reminded.
Finally, U.S. cotton futures suddenly emerged, ranking fourth after U.S. oil in terms of increase.
On the news, the U.S. cotton export weekly report released last week showed that the U.S. upland cotton export contract volume in the week from January 21, 2022 to January 27, 2022 was 75,383 tons, a 15% decrease from the previous week, but an average of 75,383 tons from the previous four weeks. The level increased by 10%; U.S. upland cotton export shipments reached 68,573 tons, a new market annual high, an increase of 53% from the previous week, and an increase of 81% from the average level of the previous four weeks.
Yao Yu, an analyst at Hua’an Futures, told reporters that the highlight of this export report is that the export shipment volume of inland cotton during the reporting period hit an annual high. The market is optimistic about the demand for U.S. cotton. Due to high domestic cotton prices in China, cotton companies choose foreign cotton. In addition, the possibility that China’s demand for US cotton will increase due to the implementation of the US ban on the import of Xinjiang products cannot be ruled out. Due to the loosening of domestic epidemic prevention policies and the impact of China’s Spring Festival holiday, textile and clothing orders in Vietnam have been transferred to Vietnam, resulting in a surge in demand for cotton.
“It can be seen from the cotton supply and demand report released by USDA that the changes in January’s forecast data compared with the December report are mainly reflected in changes in global production, due to reductions in U.S. cotton and Indian cotton production; while in terms of consumption, global consumption overall remains stable No change. The external market’s optimistic estimate of demand, coupled with the reduction in production, and the weakening of the U.S. dollar index are the main reasons for pushing U.S. cotton prices to record highs.” Yao Yu further analyzed.
Although the external market is optimistic about the future consumption of cotton, Yao Yu reminded that by sorting out the patterns of global cotton consumption growth and global GDP growth in recent years, it can be found that the two have a certain degree of correlation. In the latest “Global Economic Outlook Report”, the IMF lowered its global economic growth forecast by 0.5 percentage points to 4.4% in 2022, and comprehensively lowered its growth forecasts for all major economies this year. Affected by the COVID-19 epidemic, the road to global economic recovery is not smooth. Therefore, investors cannot be overly optimistic about consumption expectations. Investors still need to pay attention to the impact of the Fed’s interest rate hike in March on commodities.
Domestically, Yao Yu said that due to the Spring Festival holiday, the domestic market is basically at a standstill. On the last trading day before the holiday, cotton futures sharply reduced their positions and closed down due to risk aversion. The processing of new cotton gins was basically completed before the Spring Festival and gradually entered the destocking stage after the Spring Festival. In addition, after the Spring Festival, textile companies are more willing to replenish their stocks and rigid demand is still there. It is expected that cotton commercial stocks will start a downward trend. Before the holiday, the basis difference between domestic and foreign cotton futures gradually narrowed, but still maintained a gap of more than 1,000 yuan per ton. The good performance of U.S. cotton during the holidays may stimulate the current price gap to further narrow in the short term after the holiday.
Finally, Yao Yu concluded: “Overall, during the domestic Spring Festival holiday, the price of external cotton continued to rise due to strong demand from the spot side, and there is an urgent need to replenish the inventory after the start of the holiday. Zheng cotton still has some room for growth in the short term after the holiday; however, Since high cotton prices are not widely accepted by enterprises, the current spinning end profit is still in the red. If there is no obvious sign of recovery on the demand side in the market outlook, Zheng cotton may stop rising and turn down, and investors need to be cautious when pursuing higher prices.”
Rosneft and PetroChina sign agreement to supply 100 million tons of oil over 10 years
On February 4, the heads of state of China and Russia held their first offline meeting in nearly three years. China expressed its willingness to work with Russia to strengthen strategic energy partnerships, steadily advance major oil and gas cooperation projects, strengthen joint innovation and research on major technologies in the energy field, and expand new energy cooperation.
According to the official website of Rosneft on the 4th, Rosneft and China National Petroleum Corporation signed an agreement to supply 100 million tons of oil to China via Kazakhstan. The agreement period is 10 years. The plant in northwestern China will process crude oil to meet China’s demand for petrochemicals.
The statement stated that Rosneft is China’s largest oil exporter. Since 2005, Rosneft has shipped 442 million tons of oil to China. For a long time, China and Russia have continued and deepened cooperation in the energy field, playing a positive role in promoting the social and economic development of both countries. In August 2006, Sinopec and Rosneft jointly acquired and jointly operated Udmurtneft. After 15 years of joint efforts, the oil field has produced more than 96 million tons of oil and more than 1,200 new wells have been drilled.
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