Since the end of August, crude oil has experienced nine consecutive weeks of rising prices, which is rare in history. Especially in the context of the sudden changes in the domestic commodity market last week, crude oil has still experienced an astonishing trend. Unlike SC crude oil, which fell slightly due to the influence of domestic commodity market sentiment, international oil prices continued to rise on a weekly basis, especially WTI crude oil, which continued to set new highs since 2014 and performed extremely strongly in comparison. Such performance is indispensable to the tight supply in the U.S. crude oil market, which has also allowed WTI crude oil to continue to lead the international crude oil market in recent times. Optimism in the crude oil market has outweighed the impact of the overall adjustment of commodities. Oil prices were able to finally regain lost ground after several intraday drops and maintain a strong defensive performance at high levels.
On October 27, international oil prices fell across the board. The U.S. oil December contract fell 3.05% to US$82.07 per barrel; the December Brent oil contract fell 2.64% to US$83.39. /bucket. Shanghai crude oil December contract fell 1.56% in overnight trading to 523.4 yuan/barrel. On the news, U.S. crude oil inventories increased by 4.3 million barrels last week, an increase that exceeded expectations.
The imbalance between market supply and demand continues to support the strong pattern of oil prices
Although the performance of oil prices The strength remains, but currently we are more concerned about when the turning point of oil prices will arrive than the rise. In the past week, the domestic commodity futures index recorded its largest weekly decline since 2011. As a commodity, crude oil has historically lagged behind other important commodities such as non-ferrous metals in peaking in half a year. Although the current crude oil market is facing its own supply and demand situation and the background of the energy crisis, the strong oil price pattern has not relaxed yet, but it seems that there is not much left for the rising cycle of oil prices.
The picture shows the BRENT price seasonality
Judging from the situation in the US crude oil market, it has entered Seasonal accumulation stage. As refinery operating rates decline, U.S. commercial crude oil inventories show a growth trend. However, amid the energy crisis, the decline in inventories in the Cushing region of the United States has become a focus of greater concern to the market. Data show that in the week ended October 15, EIA crude oil inventories in Cushing, Oklahoma were at their lowest levels since October 2018. Last week, U.S. domestic crude oil production decreased by 100,000 barrels per day to 11.3 million barrels per day. Data released by oil and gas services giant Baker Hughes showed that the total number of rigs drilled in the United States was 542 in the week ended October 22. The number of oil and natural gas drilling rigs was reduced for the first time in seven weeks. The total number of oil rigs decreased by 2 from last week to 443. mouth. Against the background of high oil prices, the return speed of U.S. shale oil has not exceeded market expectations. Such data also allows investors to continue to remain optimistic about oil prices.
In fact, it is not just the strong supply and demand data in the United States that is fanning the flames of the crude oil market. Unlike previous expectations that high oil prices would encourage more production, data show that the overall production reduction implementation rate of the 19 countries participating in the OPEC production reduction agreement reached 115% in September, down from 116% in August. The main reason is that member countries in Africa have still not met the production increase requirements, and insufficient investment and maintenance problems have hindered efforts to increase production in Angola and Nigeria. This problem is expected to continue to affect these West African oil-producing countries in the near future. Although major consumer countries such as the United States and India have strongly called on OPEC to increase production, OPEC’s actual leader Saudi Arabia has defended OPEC+’s policy of gradually increasing production. Saudi Arabia noted that any additional crude from OPEC+ would do little to curb soaring gas costs and predicted that oil demand could rise by as much as 600,000 barrels a day if the northern hemisphere winter is colder than usual.
The picture shows crude oil inventories in Cushing, Oklahoma
In terms of demand, currently China and India There are not many bright spots in the market. Although China’s refined oil market prices rose in October due to tight supply, this situation is partly related to the significant slowdown in China’s crude oil imports this year. Due to the increasingly strict management of non-state-owned crude oil quotas, some private local refineries have been forced to Due to the limited supply of raw materials, the operating rate has to be lowered, resulting in a situation of tight supply in the refined oil market and declining demand for crude oil. However, none of these seem to have attracted enough attention from crude oil investors in the face of energy crisis concerns. The market’s focus is still on the shortage of natural gas and coal supply crises in Europe and Asia, as well as the possible cold winter weather in the northern hemisphere this year.
According to the latest news from the National Climate Center, sea temperatures in the equatorial central and eastern Pacific Ocean have continued to decline since July this year, and are expected to enter a La Niña state in October and form a weak to moderate storm in winter. La Nina event. In view of the La Niña event that occurred in the autumn and winter of 2020-2021, 2021 will be a “double La Niña year”. From this point of view, the possibility of abnormal temperatures this winter is relatively high. Entering winter, temperatures in Asia’s major consumer countries have begun to cool down, with temperatures in northern areas expected to drop to near freezing. Rising coal and natural gas prices in Asia will lead some end-users to switch to lower-cost oil as a heating fuel alternative. In the face of the urgent energy crisis, we have also seen that after the introduction of a series of institutional measures, my country’s coal supply problem is expected to be solved.This will also help alleviate the global energy supply shortage problem. Taken together, the degree of fermentation of the energy crisis in the fourth quarter plays a crucial role in the performance of oil prices.
It should also be noted that as the cold season approaches and countries gradually relax prevention and control measures, the COVID-19 epidemic in the United States, Russia, the United Kingdom, Singapore and other countries has rebounded. , causing concern. Russian President Vladimir Putin even had to declare a nationwide paid holiday from October 30 to November 7 to beat back the new wave of the epidemic. According to reports from the British “Daily Telegraph”, CNN and other media, nearly 500,000 people in the UK have been infected with the new coronavirus in the past two weeks. British Health Secretary Javid warned that if immediate measures are not taken, the number of new confirmed cases in the UK may rise to 100,000 daily. He called on politicians to take the lead in strengthening epidemic prevention, including wearing masks in places where people gather. Javid also urged people to get their booster shots as soon as possible. On the European continent, the epidemic situation in many countries has worsened rapidly like the UK. If the epidemic continues to escalate, it will once again put pressure on the fragile demand of the crude oil market. Saudi Arabia has repeatedly emphasized that OPEC+ production increase plans must remain cautious in response to the still severe epidemic situation.
There are obvious differences in the regional performance of oil prices across the world
Although The overall price of oil is strong, but it is worth noting that the crude oil market has recently shown a clear differentiation between regions. The Chinese market has been the weakest, and oil prices in the Middle East have also been weak. The trend of BRENT crude oil is stronger than the performance of these two regions, but it is also obvious Weaker than the performance of WTI, this is also very obvious from the monthly difference structure and changes in fund holdings. Data shows that funds have adopted completely different strategies on BRENT and WTI crude oil in the past two weeks. On the one hand, they have continued to reduce their net long positions in BRENT crude oil, and on the other hand, they have increased their net long positions in WTI crude oil. As of the week of October 19, the speculative net long position in the BRENT crude oil futures contract decreased by 23,754 lots to 277,167 lots, a 7-week low, while the speculative net long position in the WTI crude oil futures contract increased by 23,444 lots to 363,893 lots. This difference can be understood as a regional difference in supply and demand, but we have also noticed that compared to the international trade market, although the market supply pressure is not great, the global economic recovery still faces greater pressure, and the supply and demand situation in the crude oil market is still relatively fragile, just like As Saudi Arabia has stated: We can increase production, but who can absorb the extra crude oil produced?
The picture shows the global increase in daily vaccinations and the number of vaccinations on that day
The energy crisis has not been resolved or cooled down. In the past, the demand for oil price adjustments has been continuously delayed. However, the continued rise in oil prices has put pressure on the economy and the subsequent negative feedback to the industry will gradually increase. We have also noticed that the recent volatility of crude oil has narrowed significantly. It seems that the market is preparing for greater action. It depends on which side of the bulls or shorts will catalyze the market first. Therefore, in this situation of uncertain market conditions, it is recommended that investors must control risks, participate in the market with caution, and never make heavy bets.
The picture shows the net long position of BRENT Fund</p
