Industrial Investment (UK) Crude Oil Daily Review: Ukrainian-Russian peace talks are mixed, and international oil prices fluctuate widely

International oil prices fluctuated widely on Wednesday, Libya urged OPEC+ to speed up supply, and the unexpected increase in U.S. crude oil inventories and the possibility of a U.S. and Iran agreement to restart the Iranian nuclear agreement, putting pressure on oil prices, but mixed news in peace talks between Russia and Ukraine, coupled with a decline in new coronavirus cases in China, eased concerns that the outlook for crude oil demand was hit, providing support for oil prices. As of the U.S. close, U.S. crude oil April futures closed up $0.36, or 0.38%, at $96.11/barrel, with an intraday high of $99.18/barrel and a low of $94.06/barrel; Brent crude May futures closed down $0.76, or 0.77%, at $97.94/barrel, with an intraday high of $103.66/barrel and a low of $96.92/barrel.

The International Energy Agency (IEA) lowered its global crude oil demand forecast for Q2-Q4 2022 by 1.3 million b/d. In its monthly short-term energy outlook released on Wednesday, the International Energy Agency (IEA) noted that emergency inventories published by IEA members will provide a favorable buffer; a combination of energy security and economic factors could accelerate the weaning off dependence on oil; crude oil production would increase by about 1 million barrels per day in 6 months if an agreement is reached with Iran; any additional supply from Iran could take months; and the United States, Canada, Brazil and Guyana will see production growth with limited near-term growth potential Saudi Arabia and the UAE have so far shown no willingness to exploit their oil reserves; buyers are estimated to be withdrawing due to the impact of sanctions, with Russia likely to halt 3 million barrels of oil production starting in April; and downgrading its 2022 production growth forecast by 950,000 barrels per day to 2.1 million barrels per day, an average of 99.7 million barrels per day.

Weekly official inventory data released by the U.S. Energy Information Administration (EIA) should also pose a challenge to crude oil bears. Data released by the U.S. Energy Information Administration (EIA) shows that for the week ended March 11, U.S. crude oil inventories increased by 4,345,000 barrels to 415.6 million barrels, an expected decrease of 1.6 million barrels and a decrease of 1,863,000 barrels prior; gasoline inventories decreased by 3,615,000 barrels, an expected decrease of 1,481,000 barrels, a decrease of 1,405,000 barrels prior; refined oil inventories increased by 332,000 barrels, an expected decrease of 1.88 million barrels, a decrease of 5.231 million barrels prior; and Cushing crude oil inventories in Oklahoma increased by 1.786 million barrels, a decrease of 585,000 barrels. U.S. Strategic Petroleum Reserves (SPR) inventories fell by 1.983 million barrels to 575.5 million barrels last week, the lowest level since the week of June 28, 2002, the 27th consecutive week of decline. In addition, U.S. domestic crude oil production was flat at 11.6 million b/d last week.

At the same time, Libya called on OPEC to accelerate the increase in crude oil production. Libya's prime minister said it had a quick plan in place to enable national oil companies to increase production in the short and medium term. In addition, British Prime Minister Boris Johnson said after meeting with the Saudi crown prince that the country might increase production. This has helped to alleviate the shortage of supply.

The U.S. and Iran are likely to reach a deal to restart the JCPOA, which will lay the foundation for Iran to inject more than 1 million barrels of crude oil into the market every day, which in turn will alleviate the supply shortage. At a regular press conference at the U.S. State Department on Wednesday, U.S. State Department spokesman Price said that through different forms of high-level consultations, the United States and its allies are likely to reach an agreement with Iran as soon as possible to restart the Iranian nuclear agreement.

Mixed news of peace talks between Russia and Ukraine has left crude oil investors cautious. Earlier, the Financial Times said significant progress had been made on a possible 15-point peace plan that would include a ceasefire and a Russian withdrawal from Ukraine, provided Kiev declared neutral and accepted restrictions on its military might. But then The Independent reported that Ukraine had rejected Russia's neutrality offer. The Kremlin said Ukraine's neutral status could follow a neutral model similar to that of Austria and Sweden. Neither EU member state is within the NATO military alliance. Ukraine responded that it needed "legally proven security guarantees" and would not accept any other model. The IGC's order calling on Russia to suspend its invasion of Ukraine increases the risk of challenges to peace talks. Recently, Ukrainian President Zelenskiy wanted allies to help with air traffic control on Russian military aircraft. Russian President Vladimir Putin said Moscow was ready to discuss the neutrality of its neighbor Ukraine but would still achieve its operational objectives, saying the military operation was "proceeding as planned." White House spokesman Psaki said the United States had not seen Russia take any action that showed progress in negotiations between Russian and Ukrainian officials.

Despite the recent decline in oil prices, UBS strategists believe that crude oil prices are well supported. Russian oil exports and production will be affected by sanctions and selective import bans, further tightening global supply. We expect that later this month, the blow to Russian oil exports and production will be more pronounced. The resulting decline in global production will hardly be offset by the release of other producers or government inventories. We still expect global oil demand to hit a record high in the second half of the year, at more than 101 million barrels per day. We expect oil prices to reach around $125/b in June and not gradually fall back to $105/b until the end of the year. Crude oil and energy stocks remain hedging tools in response to the conflict in Ukraine.

Notably, the coronavirus epidemic woes facing China are receding as the number of new coronavirus infections eased on Wednesday. Meanwhile, Chinese Vice Premier Liu He is preparing to push for measures to boost the economy, which has strengthened risk appetite sentiment and supported oil prices.

Next, the latest news of the COVID-19 epidemic in China will provide a direct direction for oil prices, and most importantly, news from Ukraine is crucial for short-term trend forecasts. The further expansion of China's blockade and the positive developments in Russia's peace talks with Ukraine could easily lead to further adjustments in oil prices.

DOLLAR INDEX

The dollar index slid again after a slight gap lower and filled the gap on Wednesday, hitting a multi-day low of 98.309 as China's COVID-19 pandemic eased and China prepared to roll out measures to boost the economy, boosting risk appetite sentiment and weakening safe-haven demand for the dollar. In midday in New York, the dollar was pushed higher by the Fed's hawkish policies and higher U.S. yields, and the dollar index tested 99.00 again, but reversed lower after hitting the 99.04 high, erasing the Short-lived gains the Fed had achieved since its first rate hike since 2018. That could reflect market disappointment that there were no more hawkish statements from the Fed.

U.S. retail sales rose 0.3 percent to $658.1 billion in February, below market expectations for 0.4 percent, data released wednesday by the U.S. Census Bureau. On the positive side, the January data was revised up to 4.9% from 3.8%. The data further shows that total sales between December 2021 and February 2022 increased by 16.0% compared to the same period last year. The percentage change from December 2021 to January 2022 was revised up from 3.8% to 4.9%. U.S. retail sales growth slowed in February after a sharp rise a month ago, suggesting that consumers are cutting back on spending in certain areas as inflation limits purchasing power.

The Federal Reserve announced on Wednesday that it has decided to raise the target range for the federal funds rate (FFR) from 0.00-0.25% to 0.25-0.50%, in line with expectations. In its latest monetary policy statement, the Fed hinted that further rate hikes would be appropriate, as expected. Eight of the nine commissioners supported the rate hike, with St. Louis Fed President Bullard voting against it, and he supported a 50 basis point hike to 0.50-0.75 percent. More notably, the Fed's latest forecasts suggest that policymakers are poised to ramp up their efforts to fight inflation. The Fed unexpectedly expects a 25 basis point hike at each of the remaining six policy meetings this year, which would put the target range for the federal funds rate at 1.75%-2.00% by the end of 2022. By the end of next year, the policy rate is expected to reach 2.80 percent, higher than the 2.40 percent that policymakers now believe will slow economic growth. However, the economy may have begun to slow. Fed policymakers cut their 2022 growth forecasts to 2.8 percent from a projected 4 percent last December, and they began to consider new risks to the global economy. In this statement, the Fed dropped its long-held assertion that the pandemic is the most immediate economic risk facing the United States. This marks the end of the full-scale anti-epidemic action, with the Fed announcing an increase in the federal funds rate and pledging to "keep raising rates" to curb inflation, which is currently at its highest level in 40 years. The latest forecasts by policymakers suggest a more aggressive interest rate path than expected, reflecting the Fed's concern that inflation is climbing faster than expected and has the potential to become more durable, and could dash hopes of an easy withdrawal from the Fed's emergency anti-epidemic policy. The latest statement also said the Fed expects to begin shrinking its nearly $9 trillion balance sheet "at a future meeting."

Fed Chairman Jerome Powell said in a press conference after the FOMC meeting that it is possible to raise interest rates by 25 basis points at every future meeting, and if appropriate, we will speed up the rate hike. This year, of course, we have the potential to act faster. I still expect inflation to fall back in the second half of the year. I expect inflation to remain high until mid-year. The Committee understands that the time has come to raise interest rates and reduce the balance sheet. It's clearly time to raise interest rates and shrink balance sheets. The Fed will raise interest rates as quickly as possible and, if necessary, above neutral rates. High inflation will not become more entrenched. We need to use tools to steer inflation back down to 2%. The Fed has made great strides in its balance sheet reduction program and may initiate a balance sheet reduction at its next meeting. This time, the Fed will shrink its balance sheet more quickly than the last time. The balance sheet shrink looks similar to the last time, but at a faster pace.

Technical analysis

U.S. crude oil

Daily chart: Poly Plus channel convergence, oil prices develop below the middle rail; 14 moving average turned down, 20 moving average bullish; stochastic indicators rebounded from the oversold zone.

4-hour chart: Poly Plus channel convergence, oil prices develop below the middle band; 14 and 20 moving averages are bearish; stochastic indicators are lower.

1-hour chart: Poly Plus channel convergence, oil prices near the middle rail development; 14 and 20-hour moving averages flat; stochastic indicators higher.

Roundup: It is expected that intraday oil prices will oscillate in the range of 93.50-99.20, and you can try to sell high and suck low. Upper resistance focuses on the March 17 high of 96.90, which will be followed by a break above the February 28 high of 97.50, followed by the March 16 high of 99.20 and the March 14 low of 99.80, as well as the March 15 high of 101.55 and the March 9 low of 103.65, while the below support will keep an eye on the March 17 low of 95.05, a break below which will explore the March 16 low of 94.05, then the March 15 low of 93.50 and the February 18 high of 92.65, as well as the February 24 low of 91.45 and the February 22 low of 91.00.

Brent crude oil

Daily chart: Poly Plus channel convergence, oil prices develop below the middle rail; 14 moving averages turned down, 20 moving averages bullish; stochastic indicators flat in the oversold zone.

Roundup: It is expected that intraday oil prices will oscillate in the range of 96.20-103.65, and you can try to sell high and suck low. Upper resistance focuses on the March 17 high of 99.80, a breakout will explore the 101.00 psychological mark, followed by the March 16 highs of 103.65 and the February 24 highs of 105.70, as well as the March 9 lows of 106.20 and the March 11 lows of 107.10, while the below support will keep an eye on the March 17 low of 97.75, a break below which will explore the March 15 low of 97.40, then the March 16 low of 96.90 and the February 15 high of 96.20, as well as the February 11 high of 95.60 and the February 17 high of 94.45.

Thursday Follow:

U.S. February Building Permit

Construction of new houses in the United States began in February

US Philadelphia Fed Manufacturing Index for March

The number of U.S. jobless claims filed each week

U.S. industrial output in February

This article originated from the financial world