In fact, in the past week, the entire financial market is in a stage of risk appetite cooling, and the performance of commodities, especially industrial products, is weaker, and the performance of several consecutive days of high and falling back shows that the probability of falling back is increasing, and the black, energy, and colored sectors of Friday night have fallen almost indiscriminately, does this mean that the inflection point has come? How will crude oil behave in this context?
After March, the switching of oil price up and down rhythm has entered a new level, and recently it has been accelerating the speed of up and down switching. Before the week was also a strong unilateral rise, this week oil prices once again began to fall back to adjust, the overall oil price above $100 / barrel oscillation showed a gradual convergence of the state, through the geopolitical factors, macro factors and the oil market's own supply and demand deduction and many other factors, the market tried to find a certain direction for the later trend of oil prices.
However, from the performance of oil prices in the past week, it can be seen that the market still has no way to give a clear direction. Although the current market has been relatively calm relative to the runaway performance in early March, the current crude oil market is still full of too many influencing factors, and these geopolitical, supply and demand and macro factors can dominate the fluctuation of oil prices at different stages, which makes us only draw a vague conclusion, that is, oil prices are in a high and strong oscillation stage. It remains to be seen whether oil prices will continue to soar higher in the future because the supply tension will not be reversed, or whether they will fall as liquidity tightens and the supply side gradually increases.
At this stage, it is still difficult for oil prices to fall sharply, and the crude oil market has not yet experienced accumulation pressure. Although there is news that China, India and other major demand countries are beginning to show signs of accumulation, and the pressure caused by strategic crude oil launch will gradually reflect in the market, the latest EIA weekly report shows that the nearly 8 million barrels of single-week warehouse removal in the United States has offset these concerns. In addition, libya's resurgence of supply due to civil unrest sharply reduced by nearly 550,000 barrels / day, Russian crude oil production has dropped significantly, etc. or alleviated the potential supply pressure, which also supports oil prices to maintain relative strength.
Although there is no risk of a big fall from the supply and demand side of oil prices themselves, it is still necessary to pay attention to the performance of the entire financial market. In response to severe inflationary pressures, the Fed's tightening of liquidity has become increasingly oppressive, with almost all non-U.S. currencies in the exchange rate market depreciating sharply. While the DOLLAR is strengthening, the global stock market and bond market are performing dismal, and the risk appetite of financial markets has cooled significantly. Against this backdrop, the probability of a commodity bull market ending has increased significantly, and while the super inflation data may continue for some time and the food crisis is a cause for concern, it also means that some commodity prices may still be at odds with each other, but the possibility of a trend inflection point like industrial goods on Friday is still worth noting. From the perspective of commodities, crude oil is usually the last variety to fall, and this year's crude oil market is particularly complex, which may increase the difficulty of judging the inflection point of oil prices, but overall, the risk of oil prices spiraling out of control has been greatly reduced, from this point of view, the opportunity to go long crude oil has become scarce. From the perspective of trading, it is not advisable to chase the rise, if you want to do more, it is best to wait patiently for the opportunity. Shorting crude oil also requires waiting for clearer signals.
Although last week's data showed that U.S. strategic oil injections are accelerating, follow-up shipments will continue to increase, and U.S. crude oil production has risen to a high of 11.9 million barrels per day since May 2020, the supply side is still bullish on oil prices. Libya's major oil fields and export terminals were blocked last week, Libya's oil production fell by more than 550,000 bpd, demonstrations against Libya's prime minister affected the country's energy industry, and the country's largest oil field, Sharara, was forced to close after the shutdown of el Feel. Libya's state-owned oil company National Oil officially suspended loading from the eastern port of Zueitina on Monday, calling it "the beginning of a wave of painful shutdowns." Libya has been a destabilizing factor on the supply side of the crude oil market, having just announced that the Ministry of Oil had approved a decision to boost production to 1.4 million bpd, which on Monday shut down the largest oil fields due to force majeure, causing production and exports to be damaged again.
In addition, a core factor on the supply side is Russia's crude oil production. According to sources, Russia's crude oil production fell further to 10.11 million bpd from April 1 to 19. Russia is scrambling to speed up sales before sanctions are in place, and Rosneft PJSC, a state-owned oil giant, is selling large amounts of crude oil quickly while making major adjustments to payment procedures for at least some of the goods, to the surprise of European and Asian traders. The move once again shows that parts of the company's operations have been hit after Russia launched a special military operation against Ukraine. The Increasing pressure on the European side to embargo Russian oil has provided impetus for finalizing oil purchase and sale arrangements before the embargo is landed. Russian Oil offered to sell no more than 37.4 million barrels of Ural crude oil, loaded from western ports in May and June, which amounted to about 40 percent of its daily offshore crude exports last year, according to a media offer document. Constrained by exports and limited domestic storage capacity, Russia is forced to increase shutting down crude oil production. According to the International Energy Agency's assessment, Russian crude oil supply will be reduced by 1.5 million b/d in April and further expanded to 3 million b/d by May.
The EU is still considering a ban on oil imports from Russia, which would further restrict global oil trade in order to increase sanctions pressure on Russia following its Feb. 24 invasion of Ukraine. At present, there are still obvious differences within the European Union, according to the Russian satellite network on the 23rd, the vice chairman of the Russian Federation Security Conference Medvedev said that without Russian natural gas, Europe can not even survive for a few weeks. "We appreciate the consistency and principled nature of our European partners. Especially considering that, according to the latest data from the International Monetary Fund, Europe can hold out for no more than 6 months without our natural gas. To be honest, I can't even survive for a few weeks. ”
Recently, U.S. Treasury Secretary Janet Yellen's views have also raised concerns, and at a joint meeting of the International Monetary Fund and the World Bank, Yellen said that Europe's energy ban on Russia could do more harm than good. Yellen said the EU must end its dependence on Russian oil, gas and coal imports, but the current blanket ban may not be able to damage the Russian economy and would also raise European energy prices and raise global oil prices, with devastating effects on Europe and the rest of the world. Yellen said the U.S. has banned imports of Russian energy, but the U.S. situation is very different from Europe's. "In terms of oil and gas, the situation in Europe is clearly different from that in the United States. So, we do ban the import of all kinds of energy from Russia, but we import very little from Russia, which is not true for Europe. ”
The U.S. Department of Energy said Thursday that in response to the price increase caused by Russia's invasion of Ukraine, it had authorized a contract for the first round of crude sales of 30 million barrels in the largest strategic petroleum reserve release ever, with plans to deliver 50 million barrels of crude oil in May and June. It is reported that valero in the United States and Motiva, the largest oil refiner in North America, bought crude oil reserves released by the Biden administration.
Separately, the latest EIA report shows that for the week ended April 15, U.S. crude oil inventories decreased by 8.02 million barrels, an expected increase of 2.533 million barrels, compared with an increase of 9.382 million barrels in the previous value; gasoline inventories decreased by 761,000 barrels, an expected decrease of 1 million barrels, a decrease of 3.649 million barrels in the previous value; refined oil inventories decreased by 2.664 million barrels, an expected decrease of 933,000 barrels, and a decrease of 2.902 million barrels in the previous value. The EIA report showed that U.S. domestic crude oil production increased by 100,000 barrels to 11.9 million barrels per day last week. Exports increased by 2.09 million b/d to 4.27 million b/d and imports increased by 5.837 million b/d, down 158,000 b/d from the previous week. Strategic Petroleum Reserve (SPR) inventories decreased by 4.701 million barrels, or 0.84%, to 556 million barrels. U.S. crude oil exports were the highest since the week of March 13, 2020, for the week ended April 15. The EIA Strategic Petroleum Reserve inventory decline was the largest since the week of September 2, 2011, the 32nd consecutive week of decline, the lowest level since February 2002. U.S. crude oil production was the highest since the week of May 1, 2020. U.S. net crude oil imports fell to their lowest level since April 2021 last week.
In general, there is still a lot of flexibility in the current interpretation of supply and demand in the crude oil market, and there is not much pressure on oil prices from a fundamental point of view, which also limits the space for oil prices to fall, so that oil prices can still maintain fluctuations in high areas, and the follow-up market needs to pay attention to the trend of supply and demand changes.
On April 19, the IMF released its World Economic Outlook report, which lowered its global economic growth forecast for 2022 from 4.4% to 3.6%, and lowered its 2023 growth forecast from 3.8% to 3.6%, while raising its global inflation forecast. The US economy is expected to grow by 3.7% in 2022, previously at 4.0%; the eurozone economy by 2.8%, previously expected to be 3.9%; Japan's economy by 2.4%, previously expected to be 3.3%; the British economy by 3.7%, previously expected to be 4.7%; and the Russian economy contracted by 8.5%, previously expected to grow by 2.8%. At 01:00 a.m. Beijing time on Friday, Federal Reserve Chairman Jerome Powell and European Central Bank President Christine Lagarde attended a meeting of the International Monetary Fund (IMF), his last public appearance before the May meeting. Powell said a 50 basis point rate hike will be discussed at the May meeting, and the Fed is committed to using monetary policy tools to pull inflation back to its 2 percent target. If the timing is right, the "rate hike forward" strategy has some benefits, and a 50 basis point hike is the direction of discussion. Overall, the current market's bizarre appearance is a feedback on the change in fed interest rate hikes expectations. U.S. interest rate markets expect the Fed to raise rates further by 242 basis points by the end of the year, an increase of about 30 basis points from Monday's close. We can perceive that the global financial market is currently paying great attention to the fed's actions, and the macro-level impact is gradually increasing, both for the global exchange rate market, the stock market, and the commodity market.
It can also be seen from the recent performance of the crude oil market that although investors are still paying close attention to the game between the supply and demand sides of crude oil, it is clear that the focus has not stopped there, and investors are also paying close attention to the deduction of the macro level, deducing possible changes in oil prices from the fluctuation cycle of commodities. Investors are not aggressively betting on a big rise in oil prices, but rather increasing the assessment of the possibility of oil prices weakening, which is where we remind investors to pay attention. (Author Affilications:Haitong Futures)
This article originated from Futures Daily