Oil prices plummet, opening up room for downside?

Affected by the Iran nuclear agreement incident, international crude oil prices plunged sharply yesterday. WTI crude oil prices fell below 5% at the lowest intraday level and close…

Affected by the Iran nuclear agreement incident, international crude oil prices plunged sharply yesterday. WTI crude oil prices fell below 5% at the lowest intraday level and closed down 3.85%.

Yang An, head of energy and chemical research and development at Haitong Futures, believes that the direct trigger for the deep fall in international oil prices during the European session on Monday afternoon was the announcement by the Iranian Foreign Minister that Iran would respond to the EU’s nuclear text before midnight on Monday. If the United States agrees to the remaining A nuclear agreement can be reached by answering these three questions. The market fell sharply after hearing the news. In fact, oil prices had already fallen from highs before the news appeared, which shows that the foundation for the increase in oil prices last week was poor. According to our observation, the rebound and repair of oil prices last week was more driven by the recovery of oversold conditions and the recovery of risk appetite in the entire market. Oil prices have rebounded, but the forward curve structure is still weak, which shows that the rebound of oil prices this time is not driven by its own endogenous factors.

“The supply and demand balance sheet in the EIA Energy Outlook shows that the crude oil market in the second half of the year is at the most relaxed stage of supply and demand in more than two years. Especially in the third quarter and before winter, the market will show obvious accumulation pressure.” Yang An believes that bulk commodities This round of overall rebound is also facing obstacles, risk appetite is showing signs of cooling, medium and long-term economic downward pressure and tight liquidity will form continued pressure on commodity prices, which has further restricted the performance of oil prices. Overall, the weak oil price pattern is difficult to change in the short term.

Yue Peng, manager of the Investment Consulting Department of China Eastern Futures, believes that since August, the monthly price differences of the world’s major crude oil futures varieties have weakened significantly, indicating that the degree of “supply exceeding demand” is actually easing. As the “leader” of commodities, the essence of crude oil trading is the realistic contradiction between supply and demand. Against the background that high oil prices have suppressed global demand, such as gasoline consumption in the United States, once supply increases, prices will inevitably fall.

“The increase in supply is indeed happening. According to Bloomberg statistics, global crude oil exports increased in July compared with June. Although OPEC+ led by Saudi Arabia made a small commitment to increase production, Saudi Arabia exported 900,000 barrels per day more in July than in June. , the supply of actual trade flows is increasing, and the weakening of prices and spreads is also an objective feedback of this.” Yue Peng said.

Yue Peng believes that Iran has repeatedly expressed its willingness to reach an agreement with the United States on resuming the 2015 nuclear agreement. Once an agreement is reached, Iran’s increase in marginal crude oil exports will break the existing supply and demand pattern, opening up space for oil prices to fall. Of course, negotiations can still fail and prices can fluctuate significantly.

Affected by the sharp drop in crude oil, the domestic commodity market gapped sharply and opened lower yesterday night, with the overall decline being the main trend. Among them, rapeseed oil suffered the largest decline, closing down 4.82%, while styrene, low-sulfur fuel oil, PTA, and Shanghai Nickel all fell by more than 3%. Only cotton, paper pulp and japonica rice bucked the trend and closed higher, with cotton rising the most, reaching 2.85%.

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Author: clsrich