After a brief rebound, international oil prices once again entered a continuous decline mode, with WTI crude oil prices returning to the level in late January and Brent crude oil prices also falling back to the same level in mid-February.
Weak data from the world’s major economies has intensified market concerns about economic recession, which in turn affects expectations for crude oil demand prospects. Oil prices continue to fall from highs. The recent weakening of oil prices has been obvious, with WTI crude oil prices repeatedly testing the US$90/barrel mark, and Brent returning below US$95/barrel many times.
Market analysts pointed out that the current shortage of crude oil supply continues, and the bottom support for oil prices is relatively solid. However, with new progress in the Iranian nuclear negotiations, the market has also raised expectations for the lifting of the ban on Iranian crude oil products and their entry into the market, further putting pressure on oil prices. Iran is one of the few major oil-producing countries in the current market that can significantly increase production. The progress of negotiations on the Iranian nuclear agreement has become the biggest variable in the crude oil market in the near future.
International oil prices hit lowest level since January
In early August, international oil prices stabilized and rebounded after falling all the way. After falling below US$90/barrel, WTI crude oil futures prices rebounded to a maximum of above US$95/barrel, and Brent crude oil once touched the US$100/barrel mark.
After a brief rebound, international oil prices resumed their decline, showing signs of continuous decline.
As of the morning close on August 17, Beijing time, the price of WTI crude oil futures for September delivery fell by 3.22% to close at US$86.53/barrel; the price of Brent crude oil for October delivery fell by 2.9% and closed at US$92.34/barrel. bucket.
This price once again refreshed the lowest closing price of crude oil since August. At this point, international oil prices have given up all the gains since the outbreak of the Russia-Ukraine conflict in late February, and have also fallen slightly: WTI crude oil has hit the lowest closing price since January 25, and Brent crude oil has also been in line with the price in mid-February. Prices were flat.
Since February this year, against the backdrop of ongoing geopolitical conflicts, sanctions against Russian petroleum products by many European and American countries have exacerbated the structural supply imbalance in the global energy market, rapidly pushing up oil prices amid panic in market sentiment. WTI crude oil prices have In March, it reached a peak of over 130 US dollars per barrel, and the price of Brent crude oil rose to a maximum of 139.13 US dollars per barrel.
Since then, international oil prices have cooled significantly, but still basically fluctuated above US$100/barrel. In early June this year, as global inflation continued and commodity prices rose, international oil prices rose again to above US$120/barrel. Since late June, overall commodity prices have fallen back from high levels, and crude oil prices have also begun to fluctuate significantly.
As international crude oil prices continue to fall, refined oil prices are also declining. Since late June, domestic refined oil prices have experienced a “fourth consecutive decline”, with the retail retail price limit of gasoline falling by a cumulative 1,110 yuan/ton, and the retail retail price limit of diesel falling by a cumulative 1,070 yuan/ton.
According to calculations by commodity information agency Jin Lianchuang, as of August 17, the sixth working day of this round of refined oil price adjustment cycle, the domestic reference crude oil change rate was -3.7%, and the corresponding retail price limit of gasoline and diesel should be reduced by 190 yuan/ton. . The retail price limit of refined oil products is expected to usher in a “fifth consecutive decline”.
Demand becomes the focus of market attention
At present, Russian crude oil production and exports remain strong, but U.S. production growth is relatively slow. Compared with the market’s concerns about the supply side in the first half of the year, current concerns about economic growth and forecasts of demand prospects have become the core focus of crude oil market transactions.
There are also clear differences in the forecasts of energy agencies regarding future oil market trends. In its latest monthly oil market report, the Organization of the Petroleum Exporting Countries (OPEC) continued to lower its full-year oil demand forecast. OPEC pointed out that there are significant downward risks in the current global economy. In the second quarter, the oil market supply and demand were close to balance. It is expected that the global oil market will enter a state of oversupply in the third quarter.
The International Energy Agency (IEA) believes that hot weather and rising electricity and gas prices have stimulated many economies to shift from natural gas to oil consumption, and the amount of oil used for power generation is increasing. The IEA predicts that global oil demand will continue to grow and reach 101.8 million barrels per day in 2023, exceeding the level before 2020.
CITIC Futures pointed out that the fall in oil prices from highs has reduced the risk of U.S. inflation, the probability of the Federal Reserve’s aggressive interest rate hikes has decreased, and the pressure on the U.S. economy to accelerate recession has eased. Although the risk of a rapid recession has temporarily declined, the pressure of a mild recession is still great. The recession cycle has a significant inhibitory effect on commodity prices. Oil prices are expected to continue to be under pressure before the next recovery cycle.
CITIC Futures believes that the center of gravity of oil prices still has room to fall. The risk of economic recession in the second half of the year will further exert a substantial drag on oil prices from a cyclical perspective. Unless the expansion of geopolitical conflicts leads to supply interruptions, oil prices may continue to rise.
Market focuses on Iran nuclear deal negotiations
Recently, concerns about economic growth prospects have put oil prices under pressure, but structural tensions on the oil supply side have become the bottom support for oil prices, and oil prices are facing pressure at both ends. However, negotiations on the Iranian nuclear issue will bring potential variables to the market, and therefore have become the focus of attention from all parties.
Commodity information agency Longzhong Information pointed out that the negotiation on the Iranian nuclear issue is an important event in the crude oil market in the near future.The negative expectations of the incident have already appeared in the crude oil market, and there is a risk of further decline in oil prices.
Although the EU has stated that it will continue to advance the Iranian nuclear negotiations in the coming weeks, and Iran has also stated that it will respond to the “text” proposed by the EU in the coming days, the United States has not yet made a clear position on this, so there is still uncertainty about the final outcome of the negotiations. Therefore, it is difficult to lift the ban on Iranian oil overnight.
Huatai Futures analysis pointed out that there are still differences between the United States and Iran on key negotiation terms, but it does not rule out the possibility of reaching some kind of temporary agreement before the end of the year. The Iranian nuclear negotiation is one of the few energy cards that the United States can play. As long as there is a possibility of reaching the Iranian nuclear negotiation, its impact on the market will always exist.
Huatai Futures pointed out that Iran is one of the few countries in the current market that can significantly increase production, and Iran’s oil floating positions on land and sea are nearly 50 million barrels. Once sanctions are lifted, it will have a greater impact on the short-term oil market.