In the early morning of the 8th, Beijing time, many American media announced that the US Democratic presidential candidate Biden had won more than 270 electoral votes. According to the rules, Biden has won this election.
Oil prices have fluctuated almost entirely in line with expectations for the U.S. election this week, with the market buying and selling in line with Trump’s election. The U.S. election started on Wednesday, Beijing time, but on Monday and Tuesday, the crude oil market and the macro market had already reflected a positive and optimistic attitude, as if Trump had already secured victory.
But the subsequent process and some of the results can be described as twists and turns. The market changed from believing that Trump will definitely win to that Trump may win, and then changed to thinking that Trump still has a chance to win. , which ultimately turned into a situation where it was almost impossible for Trump to win. The change in psychological expectations during this period is the willingness of crude oil bulls to enter the market. Judging from the oil price trend on Thursday and Friday, this momentum is slowly reducing.
From a fundamental point of view, this week’s crude oil inventory data is relatively good, but increasing Libyan production and exports is the first problem that OPEC+ must face. Coupled with the resurgence of the global epidemic, crude oil demand will undoubtedly be hit. In this case, whether OPEC+ will postpone the increase in production next year and whether it will further reduce production is worthy of long-term attention.
In the short term, the risk event of the U.S. election provides sufficient focus for the crude oil market. In the short term, changes in fundamentals are difficult to replace the election situation. Therefore, in the context of the intertwining of the U.S. presidential election and the epidemic, , the short-term trend of crude oil prices has a high degree of suddenness, and the possibility of violent fluctuations in the short term cannot be ruled out. No matter how it is interpreted, the current qualitative status of oil prices in the low price range remains unchanged, and strategic investors can actively carry out mid- and long-term layouts.
The U.S. election is full of twists and turns
This year’s U.S. election is particularly lively. When Trump was about to win four years ago, the crude oil market fluctuated violently. , while the crude oil market trend was relatively stable on this year’s election day, the offshore RMB was greatly affected. At the beginning of the U.S. election, the global financial market was already in a state of carnival. The price of crude oil rose by US$5/barrel in three days, and the Dow Jones Index rose by nearly 2,000 points in three days. It was as if Trump had announced before the election that he would finally win. Will be re-elected. According to overseas betting odds, Trump’s odds have dropped to 2.2 at this time, while Biden’s odds are 1.66. The market believes that Biden will eventually win.
When the counting of votes for the U.S. election began, Biden was once in the lead. However, the slow red wave came bit by bit, and Trump successively won several key swing states. , the market further entered Trump’s carnival moment, U.S. stocks continued to rise, and crude oil continued to rise. At this time, Trump’s odds reversed, while Biden’s odds rose to 4.5. The market was betting heavily on Trump’s re-election.
Watching Biden’s advantage gradually turn into a headwind, nearly 300,000 mail-in ballots were lost in key states, and these large numbers of votes disappeared without warning. As a result, several key states that were still counting votes suspended their counting, waiting for the lost ballots to be recovered. Of course, Trump could not tolerate it. He held an emergency press conference to declare that he had won the election and called for the counting of votes to be stopped from now on.
The next day, Biden actually won the key states of Michigan and Wisconsin, defeating Trump 264:214. As long as Biden wins Nevada again, his election as president will be confirmed. After taking office, Trump’s pressure suddenly increased. On Friday night, two states favored by Trump also flipped from red to blue, Biden’s victory margin further increased, and Trump requested a recount on the grounds of false voting. Judging from the real-time odds, Trump’s odds have increased significantly again, reaching 11, while Biden’s odds are 1.055. Judging from the odds, Trump has no hope of making a comeback.
We also need to pay attention to another issue. Although Biden has reached 270 absolute votes, it is still unknown whether Trump can successfully relinquish the presidency. Trump still controls the Supreme Court, so there are still major variables in this year’s U.S. election, and there is also uncertainty about the impact on crude oil prices.
Oversupply, crude oil fundamentals are not optimistic
From a fundamental perspective, the market does not provide much trading logic in the short term. As the epidemic continues to hit new highs, demand declines and supplies from some oil-producing countries increase, oversupply may still occur in the fourth quarter, which will test OPEC+’s determination to stabilize the market.
The latest epidemic data shows that the cumulative number of confirmed cases of the global epidemic is about to exceed the 50 million mark, and the number of new confirmed cases in a single day has exceeded 500,000 and reached 583,000. In terms of continents, Asia added 97,000 people in a single day, Europe added 292,000 people in a single day, Africa added 15,000 people in a single day, and the Americas added 178,000 people in a single day.�The current main force in the number of new confirmed cases. By country, the number of new cases in the United States has exceeded 100,000 in a single day, reaching 118,000, the United Kingdom has remained at around 25,000, and France has exceeded 58,000. France currently does not have sufficient medical conditions to rescue COVID-19 patients.
The continuation of the epidemic means that the blockade will be extended. With reference to the decline in international crude oil demand in the first two quarters of this year, demand is expected to remain poor in the fourth quarter and the first quarter of next year. But now China’s crude oil demand will not fall off a cliff. This is the only remaining driving force in the global crude oil demand system.
China’s Ministry of Commerce announced on Monday the total allowed crude oil non-state trade import volume, application conditions and application procedures for 2021. The non-state crude oil quota has once again increased significantly to 243 million tons, a year-on-year increase of 20% to a new high. . Zhejiang Petrochemical Phase II and Lianyungang Shenghong Petrochemical will be operational at the end of this year and in the second half of next year respectively, and may be the main components of the quota increase.
Although the quota is valid for next year, by the end of the fourth quarter, local refineries can already purchase crude oil based on next year’s demand, but the customs clearance date has been adjusted to after January 1. Therefore, in the short term, China’s crude oil demand is still good. Even if the overseas epidemic resurfaces, the decline in international crude oil demand will be less than during the first epidemic, and crude oil prices will basically not experience the previous collapse.
From the perspective of OPEC+, after experiencing the oil price collapse, oil-producing countries have had enough of low oil prices. Therefore, if there is a serious oversupply in the market, we have reason to believe that OPEC+ will further intervene in the market. , until the price can be maintained above $40/barrel. This can also be seen from recent statements within OPEC+. Various oil-producing countries are open to delaying production increases or further reducing production in the first quarter of next year, and their determination to stabilize the market cannot be questioned.
With the resurgence of the epidemic in the United States, it is difficult for the U.S. economy to improve in the short term. There will be no shortage of fiscal and monetary stimulus after Biden takes office. , global inflation expectations still exist, and there is no basis for a sharp decline in crude oil prices.
Trump and Biden have different attitudes towards handling international political events. After Biden takes office, his attitude toward Iran and Venezuela may change. Biden may lead the United States to return to the framework of the Iran nuclear agreement and gradually lift sanctions on Iran and Venezuela. If sanctions are completely lifted, it is expected that the market will have an additional production of nearly 3.5 million barrels per day, equivalent to the entire production reduction of the OPEC Phase III agreement. However, Biden’s coming to power will have a certain restrictive effect on U.S. crude oil production. Biden supports the clean energy revolution and will also cancel subsidies for petrochemical fuels and prohibit energy companies from drilling offshore the United States.
Based on the above analysis, it is difficult to predict short-term market fluctuations. The game between Biden and Trump is the game between bulls and shorts in the crude oil market. Judging from the market trends in the past two days, bulls have begun to relax. If there is no exciting news stimulation, crude oil prices are expected to remain in a weak oscillation pattern. In the medium and long term, if Brent oil price is below 40 US dollars per barrel, it will have the value of strategic investment.
On November 6, the Shanghai Futures Exchange and the Shanghai Energy Trading Center lowered the storage fee standards for high-sulfur fuel oil, crude oil futures and low-sulfur ship fuel. It was decided that starting from March 1, 2021, the storage fee standard for futures crude oil will be temporarily adjusted to RMB 0.3/barrel/day, and the storage fee standard for futures low-sulfur fuel oil will be temporarily adjusted to RMB 2/ton/day. In the first half of the year, the exchange’s expansion of crude oil delivery warehouses and increase in storage fees once triggered drastic changes in the premium and discount of SC crude oil to international oil prices. The maximum fluctuation range of the price difference was close to 20 US dollars/barrel. This time, the exchange lowered the price of SC crude oil and fuel oil. Storage fees will improve SC’s discount to international oil prices and will also benefit SC crude oil prices. This is an opportunity worthy of attention.
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