During last Friday night trading session, the crude oil market experienced another sudden change.
Following the speeches of U.S. Treasury Secretary Yellen and Federal Reserve Chairman Powell, and the setbacks in negotiations between U.S. House Republicans and President Joe Biden’s administration on raising the debt ceiling, risk appetite in the financial market cooled rapidly, and oil prices fell from intraday highs. It fell 3%, erasing nearly half of the gains in the past week. Oil prices suffered another setback after a short-term rebound after hitting resistance. It can be seen that the interpretation of macro factors plays a leading role in the impact of investor sentiment and the performance of risk assets.
Previously, oil prices oscillated and rebounded by nearly 5% last week, but judging from the weekly trend, oil prices are still in the typical interval oscillation rhythm this year. From the perspective of long-term fluctuations in oil prices, the fluctuations in oil prices this year are also the smallest in the past four years, and oil prices have maintained a sideways seesaw pattern. This week’s rebound is just a recovery after the oil price was low and oversold, and the process is also very tortuous. There are small oscillations within the big oscillations. It is normal to switch between the rise and fall every other day. The rhythm of the rise and fall even switches between day and night. The market fluctuation rhythm is disordered. , The regularity is poor.
The performance of crude oil stems from the complex situation facing the market at this stage. Macroeconomic pressure has continued to put pressure on the market this year and has become the biggest negative factor suppressing oil prices. In particular, the plunge in oil prices caused by the impact of the European and American banking crises after March has left investors with lingering fears, and long positions are usually less sustainable. However, under the management of OPEC+’s expected voluntary production cuts, once oil prices are oversold, there will be a natural oversold recovery market. Oil prices are oscillating in this game environment of macro negative effects and supply-side production cuts to maintain stability.
At present, the influencing factors facing the crude oil market are relatively complex, and high-frequency indicators on the disk have also given relatively complex signals. When the absolute price oscillated and rebounded in the past week, the monthly difference has fallen significantly, and there are signs of flattening at the near end, while the far end is still affected by supply. The tightening is expected to have an impact, but there are many uncertainties in the near-end, and the worrying factors are more reflected in the near-end contracts. In addition, the cracking gap between Europe and the United States rebounded for the second consecutive week, indicating that terminal consumption in the European and American markets has stabilized. However, the domestic refined oil cracking gap, which has been very strong in the early stage driven by strong demand expectations, has begun to fall due to the recent poor production and sales of private refineries. , which has a certain impact on market sentiment, which is also one of the reasons why domestic SC crude oil has been weaker than the European and American markets in the past few weeks. Overall, market signals are contradictory, and factors affecting oil prices such as the macro level, supply and demand level, and unstable funding are intertwined. This has allowed oil prices to continue their disorderly oscillations, and it will take time to make the situation clear again.
The IEA released its May monthly report last Tuesday. The report showed that OECD oil inventories “plumbed” by 55.6 million barrels in March to the lowest level since 2004, and adjusted the oil price outlook from neutral to slightly bullish. From April to December, OPEC+ oil supply will decrease by 850,000 barrels per day, while non-OPEC+ oil supply will increase by 710,000 barrels per day. Russia’s oil exports reached a high of 8.3 million barrels per day in April. Global oil demand will grow faster than previously expected, with global oil demand expected to increase by 2.2 million barrels per day in 2023 (an increase of 200,000 barrels per day from last month), reaching a record high of 102 million barrels per day. Among them, OECD oil demand will increase by 350,000 barrels per day in 2023, and non-OECD oil demand will increase by 1.9 million barrels per day. Affected by China’s economic recovery, China’s oil demand recovery continues to exceed expectations, hitting a record high of 16 million barrels per day in March. It is expected that China’s oil demand growth will reach 1.3 million barrels per day in 2023, the highest growth rate on record. China, the world’s largest oil importer, will account for nearly 60% of global demand growth in 2023, joining India and the Middle East in offsetting sluggish demand in developed countries. OPEC+ reached an agreement to reduce production in April. The organization’s output will be reduced by 850,000 barrels per day. From April to December, OPEC+ oil supply is expected to decrease by 850,000 barrels per day, while non-OPEC+ supply will increase by 710,000 barrels per day. On the same day, it is generally expected that global oil supply will increase by 1.2 million barrels per day in 2023, with the United States and Brazil making the largest contributions. The report raised the 2023 oil production forecast by 300,000 barrels per day to 82.3 million barrels per day, and oil demand is expected to exceed supply by nearly 2 million barrels per day in the second half of the year.
This is a report that is bullish for oil prices, but the market is skeptical about it. In addition to the many negative uncertainties that still exist at the macro level, investors are also wary of the possible reduction in demand caused by the economic recession. Especially after giving such high expectations to the Chinese market, China’s demand data in April put a question mark on the strong expectations.
In addition, the EIA released its latest weekly data last Wednesday night. Data show that U.S. crude oil inventories stood at 5.04 million barrels in the week to May 12, compared with the previous value of 2.951 million barrels. Crude oil inventories in Cushing, Oklahoma, are 1.461 million barrels, compared with the previous value of 397,000 barrels. The U.S. Strategic Petroleum Reserve (SPR) inventory decreased by 2.428 million barrels that week to 359.6 million barrels, a decrease of 0.67%. The EIA crude oil production extended demand data for the week was 18.34 million barrels per day, compared with the previous value of 17.431 million barrels per day. The four-week average supply of U.S. crude oil products was 19.934 million barrels per day, an increase of 1.99% from the same period last year. The U.S. EIA refinery equipment utilization rate for the week to May 12 was 92%. The U.S. commercial crude oil imports excluding strategic reserves for that week were 686.0.�� barrels/day, an increase of 1.307 million barrels/day from the previous week. U.S. crude oil exports increased by 1.434 million barrels per day that week to 4.310 million barrels per day. U.S. domestic crude oil production fell by 100,000 barrels that week to 12.20 million barrels per day. The increase in EIA crude oil inventories in the United States in the week to May 12 was the largest since the week of February 17, 2023.
Overall, there are not many bright spots on the demand side of crude oil. Although the crack gap in the refined oil market in Europe and the United States has rebounded to a certain extent, demand has not shown strong performance. Recently, the domestic refined oil market has also shown a sluggish situation, with local refineries experiencing low sales for many consecutive days. Chang was forced to lower its selling price.
The apparent recovery in refined oil cracking profits in the European and American markets and the judgment that supply will be tight for the rest of the year provide support to oil prices. However, the market’s current concerns about negative macroeconomic conditions continue to erode investor confidence, and the economic recession may affect changes in crude oil demand. This uncertainty makes it difficult for investors to maintain a positive and optimistic assessment of oil prices. The position report of the latest week shows that the speculative net long position in European and American crude oil futures has further declined. Among them, the speculative net long position in WTI crude oil futures decreased by 11,974 lots to 142,509 lots, a significant decline. At present, all major institutions have lowered their annual oil price outlook, which means that it is difficult for oil prices to rise sharply again. From the perspective of various influencing factors, macro factors dominate investor expectations, while supply and demand factors in the crude oil market take a back seat. Lack of confidence limits the performance of oil prices. In the short term, crude oil will continue to suffer from weak oscillations.