Positive news that the Russo-Ukrainian war could be resolved diplomatically, as well as the UAE's call on OPEC members to boost production, eased fears of tight crude supplies, with international oil prices plunging sharply in the intraday on Wednesday by about $20. Still, the fall in U.S. crude inventories, coupled with the "don't budge" rhetoric from Russian representatives ahead of high-level talks between Russian and Ukrainian foreign ministers in Turkey on Thursday, did not fully inspire confidence that the two sides could make some progress toward a ceasefire, limiting the downside for oil prices. As of the U.S. close, U.S. crude oil April futures closed down $14.68, or 11.71%, at $110.69 a barrel, with an intraday high of $126.81/ barrel and a low of $103.64 / barrel; Brent crude Oil May futures closed down $16.76, or 12.97%, at $112.50 / barrel, and the intraday high touched $131.59 / barrel, the lowest fell to $106.45 / barrel.
Ukrainian and Russian officials issued more constructive/conciliatory remarks that boosted market risk appetite sentiment, leading to further declines in commodity prices such as crude oil and natural gas. Russia said on Wednesday it had made "some progress" with Ukraine and proposed a potential territorial compromise. At the same time, Ukrainian President Zelenskiy said in an interview with the German newspaper Bild on Wednesday that Ukraine is ready to make some compromises with Russia to end the Russian-Ukrainian conflict, but Russia also needs to make some concessions. Zelenskiy added that the aim of the talks was to end the war. According to Bloomberg, the Ukrainian president's deputy chief of staff, Drovkova, said on the 3rd that Ukraine is ready to solve the problem through diplomatic channels. He said Russia's neutrality requirements could be discussed, but there must be security guarantees.
At the same time, the UAE said it would call on OPEC+ members to speed up oil production and OPEC member Iraq's production commitments have also put downward pressure on energy prices. A dramatic shift in the UAE's attitude could pit the UAE against other OPEC+ producers. OPEC+ has so far rejected calls from the White House and other major oil consumers to speed up production, saying the main reason brent crude has surged to nearly $140 a barrel recently is geopolitical tensions rather than real supply shortages. A senior official said on Wednesday that the UAE would encourage OPEC members to ramp up oil production, given that Russia's invasion of Ukraine had pushed crude prices to their highest levels in more than a decade, according to the Financial Times. Yousef al-Otaiba, uae ambassador to Washington, said in a statement to The British Financial Magazine that "we are in favour of increasing crude oil production and will encourage OPEC to consider increasing crude oil production". "For more than 50 years, the UAE has been a reliable and responsible energy supplier to the global market and believes that the stability of the energy market is essential to the global economy," he continued. Since invading Ukraine, the UAE has become the first major OPEC country to call for increased production.
A person familiar with the matter revealed that the UAE had not consulted with other OPEC+ members before commenting. Initial indications are that the country's proposal will be met with resistance within OPEC+, and Iraq's oil minister has said that the current rate of oil production is sufficient. Any proposal to increase production, especially one that is thought to help the West wean itself off dependence on Russian crude, could create discord within OPEC+. In a phone call with Saudi Crown Prince Mohammed bin Salman last week, Russian President Vladimir Putin condemned all actions aimed at "politicizing global energy supply." Scott Modell, managing director of Rapid Energy Group, said the UAE was "saying what Washington wants to hear, but the final decision on March 31 is still to listen to Riyadh and Moscow, and if the UAE accelerates production alone, OPEC+ unity will be crumbling, and Abu Dhabi may not be willing to pay the price".
In addition, the market believes that the Ban on Russian oil imports announced by the United States on Tuesday is more relaxed, which puts pressure on oil prices. An analyst at Commerzbank said: "In theory, the United States can even offset Russia's supply cuts with its own production." Meanwhile, some traders say that after the International Energy Agency (IEA) Director-General Birol hinted that last week's decision by member states to release 60 million barrels of oil reserves could be the first decision to further release oil reserves, the market expected to further release oil reserves, triggering a profit for crude oil bulls. IEA Director-General Birol said at an energy conference in Paris on Wednesday that 60 million barrels of crude oil were released, which is only 4 percent of our stockpiles. If necessary, if our government decides to do so, we can supply more oil to the market as part of the response.
Speaking at the CERAWeek Energy Conference in Houston, U.S. Energy Secretary Jennifer Granholm said the Biden administration wants to work with U.S. oil and gas producers to increase crude oil supplies. The impact of rising fuel costs is "real and severe," and we have a responsibility to increase short-term supply when the market can be stabilized. This includes releasing more strategic reserves of crude oil and increasing production "within their reach" of energy companies, and we need more crude supplies at this time of crisis. The release of crude reserves "may have to happen again" and is focused on "alleviating the pain on the supply side of crude oil".
As oil traders continue to struggle with numerous conflicting themes, volatile market conditions are likely to continue for some time. The chief negotiator for iran's nuclear talks returned to Vienna on Wednesday to continue talks, and despite recent fears that Russia will make more demands, it is likely that a deal will be reached soon. The deal will pave the way for Iran's more than 1.3 million barrels of crude oil exports to return to global markets, helping to ease the supply gap.
While both Ukraine and Russia showed a friendlier attitude toward a deal on Wednesday, Ukraine said it would not abandon "one inch" of territory, at odds with Russia's demand that Ukraine recognize Crimea's independence. The Russian state media, the Russian International News Agency, quoted a Russian representative as saying that the Russian delegation engaged in peace talks with Ukraine would not make any concessions. This shows that it is still difficult to find a compromise. For now, it would be unwise to read too much of what the two sides of the pre-conference negotiations said, and neither side is likely to reveal their respective chips.
In addition, weekly official inventory data released by the U.S. Energy Information Administration (EIA) should also pose a challenge to crude oil bears. According to data released by the U.S. Energy Information Administration (EIA), for the week ended March 4, U.S. crude oil inventories decreased by 1.863 million barrels to 411.3 million barrels, an expected decrease of 1.25 million barrels, or 2.597 million barrels prior; gasoline inventories decreased by 1.405 million barrels, an expected decrease of 1.716 million barrels, a decrease of 468,000 barrels prior; refined oil inventories decreased by 5.231 million barrels, the largest decline since the week of March 5, 2021, and recorded a decline for the eighth consecutive week, with an expected decrease of 1.35 million barrels and a decrease of 573,000 barrels; and The Oklahoma Cousing crude oil inventory decreased by 585,000 barrels, the lowest level since August 2018, with a decrease of 972,000 barrels 。 U.S. Strategic Petroleum Reserve (SPR) inventories fell by 2.524 million barrels to 577.5 million barrels last week, the 26th consecutive week of decline, in addition to U.S. domestic crude oil production flat at 11.6 million b/d last week.
Looking ahead, the meeting of Ukrainian and Russian foreign ministers in Turkey on Thursday will be closely watched, and any signs of a ceasefire in Ukraine could hit oil prices further. The logic is that the sooner the war in Ukraine ends, the sooner sanctions on Russian energy exports will end, reducing concerns about the global supply/demand deficit. Whether the war will end quickly (there is still a long way to go between Russia and Ukraine, and it is too early to say that the war will end), it is another matter to believe that the West will quickly end sanctions on Russia. As far as NATO members are concerned, Russia, the country led by Vladimir Putin, remains a spurned country.
DOLLAR INDEX
The dollar index continued to slide from its high of 99.067 after opening on Wednesday, hitting a multi-day low of 97.815 and finally closing at the 97.99 level, down more than 100 points, recording its biggest one-day decline in nearly two years, as the prospect of a possible diplomatic solution to the War between Ukraine and Russia boosted investors' risk appetite and led to a decline in safe-haven demand for the dollar.
The dollar index is currently hovering around 98.00, and investors are waiting for the U.S. Bureau of Labor Statistics to release the Consumer Price Index (CPI). The dollar index has fluctuated significantly over the past few trading days as uncertainty over geopolitical tensions between Russia and Ukraine has risen. The index rose by almost 4 per cent compared to February 2004.
The U.S. Bureau of Labor Statistics released an inflation report last month showed that the U.S. Consumer Price Index (CPI) rose to 7.5 percent year-on-year in January from 7 percent in December, the highest level since 1982, above market expectations of 7.3 percent and up 0.6 percent month-on-month. The core CPI, which excludes volatile food and energy prices, climbed to 6 percent from 5.5 percent in December. Both overall and core CPI gains were at their highest levels since 1982. While economic growth in areas such as energy commodities and automobiles has slowed as expected, the above surprise suggests that inflation will remain strong and any substantial slowdown will remain elusive. The inertia of inflation seems increasingly difficult to break. However, after more than the base effect of a year ago, inflation will cool somewhat in the coming months. U.S. inflationary pressures continued to heat up earlier this year with the recent spike in oil prices, potentially prompting the Fed to raise interest rates at this month's meeting. Analysts at FYCM Societe General Investment (UK) expect the US CPI to rise 7.9% year-on-year in February. The core CPI, which excludes volatile energy and food, is expected to rise 6.4% year-on-year.
Technical analysis
U.S. crude oil
Daily chart: The Poly Plus channel rises, oil prices retreat towards the middle rail; the 14 and 20 moving averages are bullish; the stochastic indicator goes lower.
4-hour chart: Polyga channel spread, oil prices near the lower band development; 14 and 20 moving averages bearish; stochastic indicators lower.
1-hour chart: The Polyga channel is falling, oil prices are developing near the lower band; the 14- and 20-hour moving averages are bearish; the stochastic indicator is lower.
Roundup: It is expected that intraday oil prices will oscillate in the range of 103.65-115.55, and you can try to sell high and suck low. Upper resistance focuses on the March 10 high at 111.20, which will be followed by a break above the March 2 high of 112.45, followed by the March 7 low of 115.55 and the March 3 high of 116.45, as well as the March 7 low of 117.15 and the March 6 low of 122.10, while the lower support will keep an eye on the March 10 low of 107.00, a break below will explore the March 3 low of 106.40, then the March 2 low of 105.20 and the March 9 low of 103.65, as well as the February 24 high of 100.50 and the February 27 high of 99.05.
Brent crude oil
Roundup: It is expected that intraday oil prices will oscillate in the range of 106.20-119.00, and you can try to sell high and suck low. Upper resistance focuses on the March 10 high at 113.65, a breakout will explore the March 2 high of 115.05, followed by the March 7 low of 119.00 and the March March high of 119.75, as well as the March 8 low of 121.30 and 122.00 psychological levels, while the lower support will keep an eye on the March 10 low of 110.15, a break below will explore the March 3 low of 109.45, then the March 1 high of 107.55 and the March 2 low of 106.80, as well as the March 9 low of 106.20 and the February 24 high of 105.75.
Thursday Follow:
US Consumer Price Index for February
The number of U.S. jobless claims filed each week
This article originated from the financial world
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