Since last week, commodities have plummeted across the board, and crude oil, which was once driven higher by news speculation at the beginning of the week, has also suffered a continuous plummet. Although oil prices rebounded strongly on Friday night, they still recorded their largest weekly decline in a month. SC crude oil fell nearly 9% from its highest point, and morale was obviously hit after Brent crude oil hit the $70/barrel mark. , there was a sharp correction in the next few days, falling back to around US$65/barrel. The bulls attacked the US$70/barrel mark three times in half a month, but ultimately failed to gain anything. As the ancients said, a rapid rise will lead to another decline and exhaustion. This sentence is most appropriate to describe the price of crude oil. After the third failed rise, the decline in oil prices was significantly greater than the previous two times.
The main trigger of geopolitical events is the Palestinian-Israeli conflict. With active mediation by various countries, the Palestinian-Israeli conflict has eased, and market concerns have dissipated. . As far as this matter is concerned, the bulls failed to successfully stabilize at US$70/barrel, or the market did not believe that this incident could support the price stabilization above US$70/barrel.
In addition, last week’s Federal Reserve meeting also put great pressure on the market. Crude oil prices were not immune to the severe shock in the financial market. At this meeting, the Federal Reserve loosened its monetary policy in the future and was less dovish than market expectations. The market is worried that the Federal Reserve will tighten monetary policy and reduce liquidity in the future, which is a problem for the entire commodity. It was a huge blow. After the Federal Reserve meeting, the U.S. stock market opened sharply lower, the U.S. dollar index rose, and the price of Bitcoin fluctuated sharply, which is enough to show the huge impact of the Federal Reserve’s attitude on the market.
The Iranian issue also put tremendous pressure on the crude oil market last week. The closeness of an agreement between the United States and Iran once worried the market. The market predicts that the United States and Iran will reach a settlement as soon as June. The United States and Iran will take a step back in exchange for the Iranian nuclear agreement. Of course, one of the conditions that Iran can obtain is that crude oil can continue to be exported. On Friday, market news suggested that Iran is preparing to increase its oil export capacity to the highest level in the coming months.
Currently, China has been able to influence global commodity prices. Just after China announced that it would control price risks, domestic black and building materials futures prices fell sharply, which led to copper futures prices also falling. A pullback occurs, and crude oil prices also pull back accordingly. Just on Thursday, the Ministry of Commerce held a meeting of the Rural Revitalization Leading Group and once again emphasized the main tone of further promoting the upward trend of agricultural products and the downward trend of industrial products.
Pushing global industrial product prices downward is not just China’s demand, there are unified opinions around the world. Last week, Europe and the United States reached a settlement on steel tariffs. Lowering steel tariffs will help ease the country’s rising steel prices. After Biden launched the US$2 trillion economic stimulus plan, insufficient funds were found during the implementation, and as global commodity prices rose, infrastructure costs continued to increase. In addition, the reason why the Federal Reserve changed its attitude is that inflation in the United States continues to ferment, so the Federal Reserve has to appropriately adjust market expectations. The global economy is still recovering, and excessive inflation will inhibit economic recovery. To solve this problem, lowering commodity prices seems to be a feasible solution.
The current Iranian issue has become a major negative factor for crude oil. If the Iran nuclear deal is reached as soon as possible and Iran’s production capacity is released in advance before demand has returned to its peak, crude oil prices may plummet. But from the standpoint of the United States, the United States can make small concessions in exchange for reaching the Iran nuclear agreement. If Iran’s price is too high, then the United States must give due consideration to the cost issue. From Iran’s perspective, Iran has seen that the United States is eager to ease relations and that the United States is retreating in strength. With the support of China and Russia, Iran is obviously more confident to negotiate and ask for prices.
Iranian parliamentarians issued a joint statement saying that they require the United States to completely lift sanctions on Iran. Lifting some sanctions is equivalent to not lifting sanctions, which is enough to show Iran’s tough attitude towards the Iran nuclear agreement. . Looking at it now, the United States does not want to make such big concessions to Iran. Therefore, we predict that there are still greater risks in the Iran issue in the short term. Once the United States compromises on some key issues, an agreement will be close to being reached, which will have a greater impact on crude oil prices.
On the other hand, the epidemic problem still plagues the market and hinders the recovery of global crude oil demand. On May 21, the number of newly confirmed cases worldwide in a single day reached 640,000, a slight decrease compared with the same period last week. In terms of regions, there were 350,000 new confirmed cases in Asia, a decrease of 50,000 from the same period last week; 66,000 new confirmed cases in Europe, a decrease of 20,000 from the same period last week; and 210,000 new confirmed cases in the Americas. million, the same as last week’s data. In terms of countries, the United States had 31,000 new confirmed cases that day, a decrease of 12,000 from last week; India had 260,000 new confirmed cases that day, a decrease of 60,000 from the same period last week; Brazil had new confirmed cases in a single day 66,000 people, basically the same as last week’s data.
In terms of vaccination, global vaccinations reached 25 million doses in a single day, of which China administered 13.6 million doses in a single day, which is the same as last week.According to statistics, the number of doses increased by 4 million per day, accounting for more than half of the global share. The United States vaccinated 1.8 million doses in a single day, a decrease of 300,000 doses compared with last week’s data. India vaccinated 1.48 million doses in a single day, a decrease of 300,000 doses compared with last week’s data. Weekly reduction by 800,000 doses/day. Judging from the global vaccination situation, except for China, vaccination in other countries around the world has slowed down significantly, especially in the United States and India, where vaccination has declined significantly.
The recent weakness in the crude oil market is also reflected in the monthly difference level, especially the Brent price, which is more reflective of the spot price. When the price continues to rise, the performance of the monthly difference is once again It is better to have lower highs every time. This in itself also shows that the market does not recognize the price breakthrough. At least the spot market is not strong enough to make a big difference in the price, so investors should treat it with caution.
However, the short-term decline does not prevent oil prices from remaining relatively strong in the future JPMorgan analysts including Natasha Kaneva said that starting in the third quarter, the global supply and demand balance will be 4 million barrels per day tighter than the bank’s current forecast, which is enough to make $100 per barrel possible by the end of the year.
As long as OPEC+ continues to intervene in the market, there is no basis for a sharp decline in the crude oil market, and As demand recovers, inventory levels will continue to fall in the coming period, which will support upward price growth on fundamentals. In the short term, the crude oil market is still relatively weak. It is not ruled out that oil prices will continue to test the range of 60-62 US dollars per barrel. If the Iran issue turns negative in the near future, the oil price may fall below 60 US dollars per barrel. Fundamentally, you can pay attention to the spot discount situation and the monthly difference in Brent. If the two continue to strengthen, market demand will begin to start, and there will be prerequisites for crude oil prices to rise.
Overall, we still need to pay attention to potential downside risks in the market in the short term. We also recommend that investors pay attention to medium- and long-term strategic bargain hunting opportunities. </p
