Last night, international oil prices rose sharply. WTI crude oil rose 4.00% during the day, and Brent crude oil rose more than 3% during the day.
Yide Futures analyst Chen Tong told reporters that this year’s decline in Russian supply and the evolution of Chinese demand will be the key factors that determine the crude oil market balance sheet. Russia’s use of new transportation tools, new insurance mechanisms, new trading methods, etc. to continue selling oil can reduce the impact of Western restrictive measures, but it is estimated that it will not be able to completely offset the negative impact. As growth stabilization policies continue to be intensified and epidemic prevention and control policies are optimized, China’s economic development is expected to improve, and demand for gasoline, aviation kerosene and other oil products linked to residents’ travel is expected to contribute to super-seasonal growth. Under the baseline scenario, global oil supply and demand will show a tight balance in 2023, but the crude oil price operating center will move downwards compared with 2022, mainly because the deviation of inventory levels from the five-year average has narrowed significantly, and crude oil prices are expected to be between 80 and 100 US dollars. /Bucket range fluctuation is more likely.
At the macro level, the Federal Reserve raised its expectations for peak interest rates next year to above 5%, and no official believes that interest rates will be cut in 2023, exceeding market expectations. In addition, the European Central Bank said that inflation still faces upward risks, and it is expected to raise interest rates by 50 basis points more than once in the future; the Bank of England even stated that even if the economy will recession next year, it will not stop raising interest rates to control inflation.
In this regard, Chen Tong said that the continued monetary tightening policies of Western central banks have not only increased downward pressure on the economy, but also heightened market concerns that the economies of OECD countries such as the United States and Europe will fall into recession. The yields on U.S. Treasury bonds 10Y-2Y (10-year minus 2-year), 10Y-1Y and 10Y-3M are currently inverted, suggesting that the risk of a U.S. recession is actually rising rapidly. The initial value of the Markit Manufacturing PMI in the United States in December was recorded at 46.2, a new low in the past 31 months. It was also the second consecutive month that it was recorded below the “prosperity and contraction line”. The manufacturing PMI of the Eurozone in December was recorded at 47.8, which has been recorded below the “prosperity and contraction line” for six consecutive months. The economic recession in some OECD countries is turning from expected to reality, and oil demand will also face major uncertainties. The International Energy Agency predicts that diesel demand in OECD countries will decrease by 210,000 barrels/day in 2023, dragging down the overall oil demand growth to 39 barrels/day. day, a significant slowdown from the growth rate of 1.3 million barrels per day in 2022.
It is worth noting that unlike OECD countries that are in or near recession, non-OECD countries such as China and India are expected to have relatively good economic conditions in 2023 and will show a moderate recovery trend. The IMF predicts that China’s and India’s real GDP growth rates will reach 4.6% and 6.1% respectively in 2023, leading among major economies.
Specifically, China’s official manufacturing PMI recorded 48 in November, still below the boom-bust line. With the continued intensification of policies to stabilize growth and the optimization of epidemic prevention and control policies, China’s economic development is expected to improve, and demand for gasoline, aviation kerosene and other oil products linked to residents’ travel is expected to contribute to super-seasonal growth. Since June 2022, the Indian government has raised export taxes on diesel, gasoline and aviation kerosene, and levied “windfall profits taxes” on some oil companies to restrict exports and ensure supply in the domestic market. The Indian government’s intervention has kept domestic fuel prices relatively stable, while diesel prices in the United States and China have increased by 50% and 14% respectively. In addition, India’s economic growth remains strong. The final manufacturing PMI value in November rose to 55.7 from 55.3 in October, and new orders are also growing rapidly. Data from the Indian Petroleum Ministry showed that India’s fuel consumption increased by 10.2% year-on-year in November, climbing to an eight-month high.
“It needs to be pointed out that as the pressure from the economic downturn and the impact of the epidemic continues, China’s oil demand may experience a ‘darkest moment’ in the first quarter of 2023, and there will be no obvious recovery until the second quarter. IEA predicts that China’s oil demand in 2023 Demand growth is expected to reach +818,000 barrels per day, compared with -418,000 barrels per day in 2022. Although faced with the impact of factors such as insufficient overseas market demand and high interest rates, India’s oil demand growth may slow down next year. We will continue to see higher consumption figures. The IEA predicts that India’s oil demand growth is expected to reach +191,000 barrels per day in 2023, compared with +386,000 barrels per day in 2022.” Chen Tong said.
Regarding Russian crude oil, it is reported that in addition to a series of EU sanctions on Russian oil, the U.S. government has also stepped up its crackdown on brokerage companies and traders who forged invoices and transaction information, and at the same time monitored the entire transaction process. Among them, the focus is to prevent refineries from purchasing Russian oil at nominal low prices, but then using rebates to subsidize Russian oil companies, causing the actual import price of oil to be higher than the upper limit price. The U.S. Treasury Department also emphasized that the re-export trade of Russian oil should be strictly investigated. Russian crude oil can only be investigated if it undergoes a significant transformation in another country or jurisdiction, such as when it is processed into a new product. exemption. Simply blending Russian crude oil with crude oil from other foreign sources would not constitute a significant shift.
In this regard, Chen Tong believes that in the short term, Western sanctions will have a significant adverse impact on Russian oil production and exports. Russia is also taking advantage of the situation and trying to overcome sanctions restrictions. The game between the two sides around oil is far from over. “Since the beginning of 2022, Russia has purchased more than 100 tankers to supply oil to India, China and Turkey, including approximately 30 supertankers. Previously, multiple public reportsDow shows that in the past six months, Russia has been exporting to Europe through “gray space”. For example, Russian oil is shipped to refineries in Italy, Bulgaria and Romania through third-party ships. After these local European refineries complete refining, , sold to the European market; or through blending and other methods, the origin is blurred, so that Russian oil appears in the European market in disguise as a mixed oil. ”