Crude oil volatility increases, and the center of gravity may continue to shift downwards

Recently, with the release of a number of data and the convening of the Federal Reserve meeting, crude oil price fluctuations have increased, the center of gravity continues to shi…

Recently, with the release of a number of data and the convening of the Federal Reserve meeting, crude oil price fluctuations have increased, the center of gravity continues to shift downward, the monthly difference has weakly oscillated, and the gasoline and diesel cracking spreads have fallen from highs, but the diesel cracking price is still at a historical high for the same period. On Tuesday, oil prices recovered their losses after a sharp decline and remained in a volatile market. Among them, the trend of SC crude oil in the internal market continues to diverge from that of the external market, showing obvious differences in the rhythm of fluctuations, but it is no longer consistently stronger than the external market as it was from July to August.

“In the short term, oil prices may continue the downward trend since July, and it will be difficult to see a smooth upward trend in the coming week.” Huang Liunan, a crude oil researcher at Guotai Junan Futures, said that the core logic still lies in the hawkish stance of overseas central banks on frequent interest rate hikes. , The market risk appetite is temporarily pessimistic due to frequent geopolitical conflicts, and at least it is difficult to see a significant recovery. After the August CPI data released by the United States fell less than expected, the market’s expectations for a 100 basis point interest rate hike at the Federal Reserve’s September interest rate meeting increased rapidly. This means that the probability of a strong rebound in oil prices, including other major asset classes, is limited at least before the Federal Reserve interest rate meeting on September 22 (2 a.m. Beijing time), and it has not yet entered the upward window period.

Zheng Mengqi, an energy researcher at HIS Futures, said that according to CME FED WATCH, the Fed is more likely to raise interest rates by 75 basis points this time. Under the shadow of hawkish expectations, the U.S. dollar index is at a relatively high level in history and oil prices are under pressure. When the results of the Federal Reserve’s interest rate hike come to fruition, crude oil’s negative effects will be exhausted and it may stop falling and rebound.

From the perspective of supply and demand, Huang Liunan told reporters that the gross profit margin of overseas refined oil products has continued to weaken recently. According to him, on the one hand, this is related to the large-scale issuance of domestic refined oil quotas at the end of September, which may have a profound impact on the global oil market and alleviate supply shortages; on the other hand, it may partially confirm the contraction of real demand for oil products. “As for the second point, considering the long-term conflict between Russia and Ukraine and the damage to the economy caused by many factors such as stagflation pressure in Europe, the market needs further verification of demand changes by various inventory data of oil products.” Therefore, this week, in addition to the September Federal Reserve interest rate meeting, In addition to the results of the meeting on interest rate hikes, the API inventory data released early Wednesday morning is equally important. “He reminded that as time goes by, the market will gradually move from recession expected trading to the verification stage of demand deterioration, and the importance of various domestic and overseas inventory data such as API in the fourth quarter will increase.

Data released early this morning showed that API crude oil inventories in the United States for the week to September 16 were 1.035 million barrels, significantly lower than expected and previous values. The previous forecast was 2.321 million barrels, and the previous value was 6.035 million barrels.

In addition, there are other uncertainties in the crude oil market. Yan Lili, a crude oil researcher at Xinhu Futures, said that for example, there is currently no progress in the US-Iran negotiations and we still need to wait for Iran’s reply; when natural gas prices are high, there is a certain amount of alternative consumption of oil products. According to the IEA September report, this winter’s replacement consumption is 500,000-600,000 barrels per day, and the total replacement consumption in Europe is 400,000-500,000 barrels per day. Compared with the same period in 2021-2022, the increase is approximately 300,000 barrels. /day. In Northeast Asia, 100,000-150,000 barrels per day, an increase of 50,000 barrels per day year-on-year.

“The UAE said it has accelerated a plan to increase its oil production capacity. ADNOC hopes to reach 5 million barrels per day of crude oil production by 2025. In addition, Kuwait Petroleum Company also said it plans to increase production when the market needs it.” Zheng Mengqi added, Affected by this, the market is worried that OPEC may relax its commitment to increase production, thereby increasing crude oil supply. However, OPEC members have different opinions on increasing production, so the UAE and Kuwait’s positions need to wait for the results of the next OPEC+ meeting to be announced.

Zheng Mengqi believes that overall, the Federal Reserve’s interest rate hikes have suppressed oil prices, and the economic recession caused by sharp interest rate hikes is expected to affect crude oil prices. However, Iranian crude oil has not yet returned, U.S. production remains stable, and OPEC members with idle production capacity have not explicitly increased production. Basically, There is still support in the market, and geopolitical risks are uncertain. Crude oil prices are still mainly oscillating in a wide range.

In Huang Liunan’s view, as long as the overseas economy does not experience a hard landing, the probability of a “fall in the third quarter and rebound in the fourth quarter” is relatively greater. He believes that oil prices still have downside risks in the short term, and may be at the end of this downward trend for the time being. Taking WTI as a reference or testing the support of US$80/barrel, oil prices in internal and external markets are close to but have not yet reached the reversal time point.

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Author: clsrich