Crude oil prices fluctuated violently last week, and the Suez Canal accident roiled the entire crude oil market. Last Tuesday, crude oil prices plunged 5.9%; on Wednesday, oil prices surged 6.06%, stimulated by the news; on Thursday, oil prices plunged 3.74%; last Friday, oil prices surged 4.08% again, and the market was repeatedly The fluctuations made me dizzy.
The Suez Canal emergency was similar to the attack on Saudi oil facilities that year. Oil prices rose sharply during the session and returned to normal after the news was digested. The difference is that the impact of this incident is smaller than that of the Saudi attack, and the recovery time is faster, and the overall impact is relatively small.
In addition, crude oil demand expectations were not good when Saudi Arabia was attacked. However, the current supply side is supporting prices and demand expectations are recovering. The only uncertainty is that the epidemic will break out again and disrupt The expected recovery in market demand has made the market worried. The market has faced four epidemic shocks and has become somewhat immune to the expected impact. Therefore, crude oil prices were extremely tangled during the session. After the canal was blocked, they failed to rush forward in one go. It failed to continue the decline after the news came out. Instead, long and short began to compete continuously.
The market expects to see the canal unblocked in the coming days and this brief episode will pass. Judging from the price performance last Friday, the market has temporarily stabilized at $60/barrel after two sharp declines. Oil prices may still oscillate in this area in the short term.
From a technical point of view, this wave of price decline is a correction and repair from November last year to March this year. If this round of bull market has not yet ended, then the price of Brent crude oil will It should not effectively fall below 57 US dollars/barrel, so in the short term we can regard 57-60 US dollars/barrel as a periodic bottom. If the price returns to this range, there will be strategic bottom-buying needs or investments with relatively low inventories. You can try the layout.
Short-term disturbance of canal blockage
On March 23, a container ship sailed in the Suez River The grounding occurred, causing traffic jams in both directions in the Suez Canal. The ship was designed to be 400 meters long, and the water surface width of the Suez Canal was about 300-400 meters. The grounding of the container ship hindered the normal navigation of the Suez Canal and affected crude oil exports in the Middle East. Due to the large size of the ship and its almost full load, as well as the influence of weather factors, the rescue progress has been slow. Judging from the recent progress, it has been difficult to completely clear the water in recent days.
The importance of the Suez Canal is self-evident. The Suez Canal and the Strait of Hormuz are also important channels for crude oil exports in the Middle East. Most of the crude oil from Middle East countries such as Saudi Arabia, Iraq, and the United Arab Emirates Exit through this strait. Therefore, the blockage of the Suez Canal can cause a contraction of global crude oil supply in the short term. But the canal is not the only channel. Oil tankers and cargo ships can also transport via the Cape of Good Hope route, but this will significantly increase shipping time and costs.
According to satellite data monitoring, about 13 million barrels of crude oil are currently affected by transportation. As subsequent oil tankers arrive one after another, this number is expected to continue to rise. This incident can be understood as a small temporary supply cutoff in the global crude oil market. It was close to the attack on Saudi oil facilities that year, and the market did have a similar stress reaction, which significantly increased oil prices.
But the last time Saudi oil facilities were attacked, crude oil prices had peaked at US$75.6/barrel for a long time. The market as a whole was in a weak position, and the fundamentals of the crude oil market at that time were also weak. There is no support for the price to remain above US$70/barrel for a long time. Therefore, after the attack on Saudi oil facilities, the oil price surged sharply to around US$72/barrel. The price fell from the high that day, and it continued to decline in the following trading days. After coming out of the low point, the lowest has returned to around US$55/barrel.
The impact of the canal blockage incident is far less than that of the attack on Saudi oil facilities, and market sentiment and fundamentals are also very different. In the current market, major institutions expect that the oil price will reach 80 US dollars per barrel in the future, and the fundamental situation is also improving. Therefore, although the canal incident is relatively small, it is enough to push the oil price to stop the decline. Bulls took advantage of this news to launch a new round of upside.
If oil prices are allowed to continue to fall, I am afraid that we will see US$55 per barrel. Once again, the market took advantage of unpredictable events in a downtrend to halt the price trend. Judging from the price performance last Friday, US$60/barrel may be the bottom in the short term.
European epidemic has rekindled again
The global epidemic has worsened again. As of March 25, the global The number of newly confirmed cases has once again returned to more than 630,000, an increase of 320,000 from the same period last month, and the cumulative number of confirmed cases has reached 126 million. Asia added more than 150,000 new cases in a single day, an increase of 90,000 from the same period last month. The number of new confirmed cases in Europe has returned to more than 250,000, an increase of 130,000 from the same period last month. The number of newly confirmed cases in the Americas also reached 210,000, an increase of 100,000 from the same period last month. It seems that there is another major outbreak of the global epidemic, which has almost doubled compared with the same period last month. Therefore, the recent decline in oil prices is also a reflection of this concern. The resurgence of the epidemic has caused parts of Europe to resume blockades, which will in turn affect the recovery of crude oil demand.
Although global vaccination is still ongoing, it is limited to a few developed countries. The United States has vaccinated 130 million doses, China has vaccinated 90 million doses, and the United Kingdom has vaccinated 30 million doses. Judging from the vaccination rate, Israel is almost close to fully accepting vaccinations.���The vaccination rate in the UAE has also exceeded 70%. For some relatively backward countries, the number and proportion of vaccinations are not so optimistic. For example, in Brazil, the number of new confirmed cases in a single day has exceeded 80,000, and the number of confirmed cases has reached 12 million. India’s data is not very good either, with 60,000 new cases in a single day, 40,000 new cases in France, and more than 20,000 cases in Italy and Turkey.
The repeated epidemics have caused the fourth round of impact on oil prices. The market has already acquiesced that the new crown epidemic will coexist with mankind, so the impact on oil prices will be far less than before. Although some areas have been blocked again, there has not yet been a large-scale blockade, and the number of vaccinations in the United States has been very large. At least there will be no blockade between China and the United States, so it will not have a big negative impact on global demand. Therefore, the epidemic situation will cause disturbances in the short term, but it will not have a fatal impact on prices in the medium and long term, and we do not need to worry too much.
Other variables in fundamentals
We also need to pay attention to the OPEC meeting and U.S. market conditions. OPEC will meet again in early April to discuss production limits for May. There are market reports that the current status will remain in May, and Saudi Arabia is likely to continue to voluntarily reduce production. If this is the case, then the supply side will still remain relatively scarce, and there will be no basis for a sharp decline in crude oil prices.
In the U.S. market, Biden plans to launch a larger stimulus package, which will support oil prices to remain strong. U.S. crude oil production has fully recovered and there are recent signs of increasing production. Oil prices are at high levels, and U.S. crude oil does have the motivation to increase production. We need to pay attention to the speed and extent of its increase in production. If it is just a slow increase in production, it will not have a great impact on oil prices. If the increase in production is faster, it may have a certain impact on OPEC’s production reduction policy.
U.S. crude oil is still at the time of seasonal inventory increase, so we must also pay attention to short-term inventory disturbances. Taken together, the current oil price seems to be showing signs of stabilizing around $60/barrel. US$57-60/barrel may be a strong bottom support for the short-term market. If the oil price is lower than US$60/barrel, investors with long-term strategic bottom-hunting needs can carry out light positions. </p
