After the National Day in China, crude oil futures prices began a wave of decline.
Yang An, head of energy and chemical research at Haitong Futures, said that the recent decline in crude oil futures prices is mainly due to three reasons: First, during the National Day holiday, oil prices continued to rise due to OPEC production cuts, and the cumulative increase in the short term was relatively large, and funds were less willing to continue to pursue higher prices. , the floating profit chips are large, and the market itself has overbought callback needs; the second is the negative pressure at the macro level, the Fed’s interest rate hike expectations are increasing, liquidity will be further tightened, and the global economic downward pressure will put pressure on the commodity market, which can Seeing that the US dollar is strong while commodities are weak, this has also exerted a negative pressure on oil prices and promoted the decline of oil prices. Third, the United States has reacted fiercely to OPEC’s production cuts. The Biden administration has expressed strong dissatisfaction and will consider imposing restrictions on OPEC. The reduction of production and the launch of countermeasures have caused many investors to remain on the sidelines of the game between OPEC and the United States, and also offset the long willingness of some investors.
Dai Yifan, energy and chemical director of Nanhua Futures Consulting Services Department, said that crude oil continued to fall after compensating for gains. The main reason is that the market focus has returned to concerns about demand. After the National Day holiday, gasoline cracking in the European, American and Singaporean markets remained low, and diesel cracking fell back from highs. High oil prices lacked support from the demand side. The Federal Reserve continued to send hawkish messages, and the market became increasingly pessimistic about economic expectations. Market concerns about the demand side once again dominated oil prices.
Dong Chao, an energy analyst at Shenwan Futures, analyzed that Saudi Arabia’s exports showed no signs of decreasing in November. Although OPEC will start to reduce production by 2 million barrels per day in November, major oil companies can fully meet the November ordering contract from Saudi Arabia. This shows that Saudi Arabia’s share of production reduction will be reduced by reducing its own demand and from The offset of Russian imports has not had as great an impact on international crude oil supply and demand as imagined. In addition, the U.S. CPI rose by 8.2% year-on-year in September, and the core CPI rose by 6.6%. Fed officials made tough statements that curbing inflation is still the primary goal. The market is basically determined to raise interest rates by 75 basis points in November. The widespread and rapid interest rate hikes around the world have affected economic growth. Considering that the Federal Reserve has repeatedly emphasized that controlling inflation is its top priority and a short-term economic recession is an acceptable cost, it does not rule out the possibility of accelerating interest rate hikes again in the future.
In addition, Dong Chao said that last week, the three major oil consulting agencies lowered their demand forecasts for 2022. Among them, OPEC significantly reduced its forecast by 500,000 barrels to 2.6 million barrels, which explains to a certain extent why OPEC’s previous decision to reduce production by 2 million barrels. Although the reductions of EIA and IEA are not that large, they also show that the overall market is not optimistic about demand.
Yang An said that the core factors affecting oil prices at the current stage are based on the expectations brought to the market at the macro level, especially the Federal Reserve’s monetary policy. OPEC’s production cuts have reduced excess pressure from the supply side by 1 million barrels per day, which has provided a floor for oil prices. However, whether oil prices can recover effectively still depends on the performance of the demand side. Against the background of the current downward pressure on the global economy, the market remains cautious on the demand side. In addition, the next two weeks are a critical period before the U.S. midterm elections. It is difficult for the U.S. government to tolerate the strong performance of energy prices, and may launch measures at any time, including continued selling of strategic reserves. Crude oil and other measures to limit the rise in oil prices.
Looking forward to the market outlook, Yang An said that in the short term, this correction has begun to gain support, and there is a high probability that oil prices will rebound in the short term. Judging from the impact of OPEC’s production cuts, there is a risk that the crude oil market supply will tighten again in November and December. In addition, December is approaching the implementation stage of Western countries’ sanctions on Russian crude oil, which may also affect the crude oil market supply. These may Oil prices will remain relatively strong in the fourth quarter, but at a macro level, the Federal Reserve’s continued higher-than-expected interest rate hikes and the downward pressure on the global economy will limit the performance of oil prices. From this point of view, oil prices will most likely maintain a relatively resilient range in the fourth quarter.
Dong Chao said that this week’s decline in crude oil shows that the foundation for market growth is still very weak. There are many factors dragging down oil prices, but the only reason for the increase seems to be OPEC’s yet-to-come production cuts. Taking into account possible countermeasures from the United States, the room for oil price increases is limited. In the future, we need to pay attention to whether European and American sanctions on Russia will affect the export of Russian crude oil. In the short term, oil prices will still be weak.
Dai Yifan said that the trend of the Federal Reserve raising interest rates is not over yet, future global economic growth is still not optimistic, the US dollar remains strong, and crude oil will still mainly fall in the future. However, due to OPEC+ production cuts, the global crude oil market lacks marginal production growth, and global crude oil inventories remain low. With the promotion of risk events, crude oil will show a periodic sharp rebound. It is recommended to trade short-term with light positions and adopt a sell high and buy low strategy outside the range.