The crude oil market appeared to be showing signs of the end of its bull market last week. U.S. oil fell by about 7.7% last week, the largest weekly decline since the week of October 2 last year; Brent oil fell by nearly 6.3%.
Yesterday, oil prices continued to plummet! Yesterday afternoon, when the domestic futures market closed, crude oil in the previous period fell by more than 2%, and US oil and cloth fell by nearly 4%, a new low since July 20. Internal futures opened at night, with the main Shanghai crude oil contract falling nearly 3%.
As of this morning’s close, the main Shanghai crude oil futures contract closed down 2.32% in night trading at 416.5 yuan/barrel. WTI September crude oil futures closed down 2.63%, and Brent October crude oil futures closed down 2.35%, both hitting new closing lows for major contracts since July 19.
In terms of the epidemic, as the infection rate of the Delta variant virus accelerates, concerns about the possible erosion of global oil demand have resurfaced.
According to Reuters public health data, on the 9th local time, the number of confirmed cases of new coronary pneumonia in the United States has increased by more than 100,000 per day for three consecutive days, an increase of 35% over the past week. . Nationwide, hospitalizations have increased by 40% in the past week, and deaths have increased by 18%. In addition, Florida has set a record for the number of hospitalizations due to COVID-19 for eight consecutive days. Across the country, the number of children being treated for COVID-19 is also rising.
Yesterday, Iran reported 40,808 new confirmed cases of COVID-19 and 588 new deaths, both hitting record highs.
There is no doubt that Delta has become the main strain of the global epidemic. However, the alarm about the Delta variant has not yet been lifted, and the variant known as “Lambda” has begun to emerge again.
More than a thousand cases of “lambda” have been reported in the United States. The virus may be highly contagious and resistant to immunity, and has spread to Asia
In August 2020, scientists first discovered a new coronavirus mutant strain C.37 in Peru. The WHO named it “Lambda”. Since this mutant strain was discovered in Peru, spread rapidly. Currently, this variant has spread to more than 30 countries, with particularly high transmission rates in South American countries.
Currently, the WHO lists the Lambda variant as a “variant under observation (VOI)”, which is lower than the “variant of concern” to which Delta belongs. According to WHO’s standards, if the spread of “variants to be observed” further accelerates to a certain extent and existing epidemic prevention measures need to be adjusted, it will be upgraded to a “variant of concern.”
Researchers from the University of Tokyo and Osaka University in Japan said that the spike protein of the lambda variant is highly contagious, and the “culprit” responsible for this high contagion is the The virus has two mutations, T61 and L452Q, which change the binding properties of this variant to the angiotensin-converting enzyme 2 (ACE2) cellular receptor. Although the study has not yet been peer-reviewed, it is certain that the Lambda variant is no less active in infecting cells than the Delta variant – which is currently considered one of the most contagious strains in the world.
According to the Japan Broadcasting Association website, a woman who was found to be infected with a new strain of the virus at the quarantine station at Tokyo Haneda Airport in August and July has been confirmed to be infected. The case is a mutated strain of Lambda. This is the first time a case of infection with a mutated Lambda strain has been confirmed in Japan.
According to CNN, as the epidemic spreads, cases of infection with the “Lambda” strain first reported in Peru in December last year have appeared in the United States. According to data from the Global Initiative for Influenza Data Sharing, the world’s largest influenza and new coronavirus data platform, there are currently 1,060 cases of new coronavirus pneumonia caused by the “Lambda” strain in the United States.
Will the raging “Delta” cause oil prices to continue their decline?
Talking about the continued plunge in oil prices this week, Li Yanjie, chief researcher of CITIC Futures Energy and Chemical Industry, told reporters that the main reason for the continued plunge this week is still the rapid spread of the Delta variant virus , the epidemic situation worsened in many places around the world. The strength of the U.S. dollar index reflects the rising risk aversion in the market. Specifically, if the United States, which has not yet achieved herd immunity, takes lockdown measures despite an increase of 200,000 confirmed cases every day, the risk posed by the Delta variant virus will become increasingly greater. In addition, the global blockade measures adopted in response to the third round of the epidemic have had a negative impact on crude oil demand. For example, due to the spread of the epidemic in Nanjing, at least 46 cities in China have advised residents to avoid non-essential travel. The interference of the epidemic on the recovery of travel demand has led to the outlook for oil demand. Overcast again.
Zheng Mengqi, an energy researcher at Hizheng Futures, said that the U.S. non-agricultural data released last Friday exceeded expectations, so the market began to expect the Federal Reserve to reduce QE this year. Strengthened, the U.S. dollar index strengthened, and the price of crude oil, a commodity, came under pressure. The Delta variant of the virus is spreading, and the Lambda strain has also appeared in many countries and regions. The spread of the epidemic has frustrated the recovery of global fuel demand and intensified concerns about the decline in crude oil demand. JPMorgan Chase expects only 53,000 new non-farm jobs to be added in August, a sharp decline from the previous month. U.S. peak season demand has begun to weaken, and U.S. EIA crude oil inventories increased last week. In July, my country imported 41.243 million tons of crude oil, an increase of only 1.108 million tons from the previous month. Considering that the domestic epidemic is still serious, aviation demand has been affected. The early market expectations for a strong recovery in crude oil demand fell sharply, and bulls took profits and left the market, causing oil prices to fall.
Saudi Aramco insists on increasing production, and crude oil bulls have fled sharply. Where will the oil market go this week?
Last weekend, Saudi Aramco announced its second-quarter financial results. The world’s largest energy company posted second-quarter net profit of 95.5 billion riyals ($25.5 billion), its highest level since late 2018. The company expects to spend $35 billion this year on expanding production, part of which will be used to increase daily oil production capacity from 12 million barrels per day to 13 million barrels per day.
Crude oil bulls fled sharply last week. The U.S. Commodity Futures Trading Commission (CFTC) report showed that as of the week of August 3, speculative net long positions in WTI crude oil futures decreased by 18,368 lots. to 305378 lots. The Intercontinental Exchange (ICE) also reported that speculative net long positions in Brent crude oil futures decreased by 1,994 contracts to 309,665 contracts last week.
Zheng Mengqi believes that Saudi Aramco’s continued increase in crude oil production capacity will have little impact on crude oil supply in the short term. Saudi Arabia will still reduce production in accordance with the OPEC+ production reduction agreement. Although production is increasing month by month, the extent of the increase is expected to be in accordance with the provisions of the agreement. In the long term, some OPEC+ oil-producing countries will raise their production reduction baseline in May next year, and Saudi Arabia is one of them. By then, crude oil supply will increase significantly, while demand growth will slow down, putting oil prices under pressure.
Li Yanjie believes that the current scale of OPEC+ idle production capacity is around 7 million barrels per day. Sufficient idle production capacity determines that OPEC+ can firmly control the supply and demand pattern and oil prices in the oil market. and flexibly adjust oil supplies. Saudi Aramco’s increase in production capacity by 1 million barrels per day means that there is more room for future oil supply increases, and it also hides potential risks that are less likely but negative for oil prices.
Looking forward to the market outlook, Li Yanjie said that the sharp reduction of long positions in the U.S. Oil Futures Management Fund with strong financial attributes in the past few weeks means that part of the rising momentum in the oil market has been withdrawn, and the Delta virus is spreading around the world. The spread in various places has led to a high probability that the oil price trend in the future will show “twists and turns.” Although the increase in the number of vaccinated people will help the recovery of the demand side in the medium and long term, and the path to increase the supply side is also very clear, the overall upward thinking has not changed under the supply shortage pattern of the oil market in the second half of the year, but the supply and demand gap and the pace of demand recovery determine Therefore, it is expected that it will be difficult to continue the rise in the first half of the year in the future market. At the same time, it faces many uncertainties, so it is necessary to operate cautiously and assess risks in a timely manner.
“On the whole, the current crude oil market supply has not changed much, and demand growth has slowed down. Affected by variant viruses, demand is expected to weaken. However, due to the support of the supply side, that is, the United States It is difficult for shale oil production to expand significantly in the short term. OPEC+ has slightly increased production to stabilize the oil market. The crude oil market is still relatively balanced. It is expected that the space below crude oil prices will be limited. If there is no substantial benefit on the demand side, oil prices will continue to oscillate. The market outlook needs Pay attention to the progress of US-Iran negotiations and local geopolitical conflicts,” Zheng Mengqi said. </p
