Oil prices have been relatively strong recently both internally and externally, with Brent crude oil reaching a new high since 2014. However, international oil prices fell sharply on Monday, with Brent crude oil and WTI crude oil both falling more than 3% during the session.
“The recent strength in oil prices is mainly due to macroeconomic sentiment and geopolitical factors.” Du Bingqin, an energy and chemical analyst at Everbright Futures Research Institute, told reporters that in the past month, supply disruptions have occurred frequently, including Libyan oil field blockades, The outbreak of civil unrest in Kazakhstan, the explosion of oil pipelines in Turkey, attacks on oil facilities in Saudi Arabia and the United Arab Emirates, as well as the ongoing tensions between Russia and Ukraine, have made the market increasingly worried about supply stability. On the macro front, inflationary pressure remains high in Europe and the United States, international macro hedge funds have increased risk appetite for commodities, and funds’ net long positions in WTI and Brent crude oil have continued to increase, further pushing international oil prices upward.
Regarding the market outlook, last week the three major institutions EIA, IEA and OPEC released monthly reports one after another, with some downward revisions to non-OPEC supply. Du Bingqin explained that this is mainly due to the lack of flexibility in U.S. crude oil supply growth due to capital expenditure constraints, while OPEC+’s increase in production in December last year was still lower than planned, coupled with frequent supply disturbances and low inventory levels, short-term crude oil Supply may still be tight. In terms of demand, she said that the current market generally expects that the mutated strain Omicron will have a weaker than expected impact on crude oil market demand. European and American countries have not restarted large-scale blockade measures, and all three major institutions have increased crude oil demand in 2022.
“The fragility of supply and better-than-expected demand have postponed the expected accumulation of crude oil storage to the second quarter. In the short term, the global crude oil market is expected to remain tightly balanced in the first quarter.” Du Bingqin said that it is necessary to pay attention to the oil price in the first quarter. The current high level lacks the risk of subsequent adjustment, and as the Spring Festival holiday approaches, it is recommended to focus on risk prevention.
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