This week, crude oil prices continued to fluctuate sharply. From Monday to Wednesday, oil prices fell rapidly due to the disturbance of the epidemic. Brent oil prices fell from above US$75/barrel to directly below US$70/barrel on Thursday. The fermentation of the domestic epidemic has given the market pessimistic expectations, and at the same time, crude oil prices have fallen from highs.
The domestic epidemic situation has fermented faster than the market expected. Recently, Jiangsu, Hunan, Henan and other places have successively broken out the new coronavirus pneumonia epidemic. This incident has a great impact on the domestic commodity market. , stock markets and commodities have all caused a certain emotional impact. In addition to the domestic epidemic, the foreign epidemic is even more worrying. In particular, the number of new confirmed cases in Japan continues to exceed previous highs. The market is still worried that mutated viruses will disrupt the rhythm of the entire market.
Geopolitical issues cannot be ignored. After an accident involving an Israeli oil tanker last week, all focus was directed at Iran, which was said to have attacked the oil tanker with a drone. Then there was news that Iranian-backed forces had seized an oil tanker in the Middle East Gulf. The two events put together have heated up geopolitical events again. On August 5, Israeli Defense Minister Gantz stated that Israel was prepared to use military means to attack Iran. He said: “We are at a point in time to take military action against Iran, and the world needs to take action against Iran now.”
Iran’s new President Raisi said that it is necessary to Lift all sanctions on Iran, and Iran supports any diplomatic mechanism that helps lift sanctions. However, before taking power, Western countries repeated their old tricks and put extreme pressure on Iran. We have seen too many such rogue methods. “When people sit at home, the pot comes from the sky” is always related to Iran. In fact, Iran has no motive to do these things. When the new president takes office, who will make his inauguration process unpleasant? These extreme pressures from Western countries are nothing more than trying to make the new president yield and see the current situation clearly.
As a relatively hard-liner, Lacey is likely to continue to be tough on the Iran nuclear agreement. It seems more difficult for Western countries to obtain favorable conditions from Lacey. This also determines that Western countries may use tougher geopolitical means to put pressure on Iran. Therefore, geopolitical events in the Middle East are still likely to continue to ferment. At present, it is not smooth to reach a complete Iran nuclear agreement between the United States and Iran. Therefore, it will still take some time for Iranian crude oil to enter the market openly. This does not prevent Iranian crude oil from entering the market openly. Return to the market through other means.
The disturbance of the epidemic continues
Since last week, domestic The epidemic has developed faster than market expectations and has now spread to many provinces, with many places implementing emergency blockade measures to curb the spread of the virus. Recently, the outbreak of the epidemic in Jiangsu, Hunan, Henan and other places has caused a certain emotional impact on the domestic commodity market, stock market and commodities. Fortunately, the domestic response was quick, and some areas were blocked in a timely manner and all employees were tested for nucleic acid. As of August 6, only Jiangsu had a higher number of newly confirmed cases in a single day, while Hunan and Henan have both been effectively controlled. Even in Jiangsu, the current epidemic only stops in Yangzhou City, and the epidemic prevention and control in Nanjing City has also been effectively controlled. It is believed that under strict control measures, the domestic epidemic will not cause too much trouble to the market.
However, the international market situation is not optimistic. On August 5, there were 700,000 new confirmed cases worldwide, and the cumulative number of confirmed cases exceeded the 200 million mark. Among them, 280,000 new cases were diagnosed in Asia, compared with an increase of nearly 140,000 in the same period last month. There were 130,000 new confirmed cases in Europe, an increase of nearly 30,000 in the same period last month. There were 230,000 new confirmed cases in the Americas, an increase of nearly 130,000 in the same period last month. After the Americas, Asia has become the new eye of the epidemic storm.
From the perspective of vaccination, the cumulative vaccination volume in China has reached 1.7 billion doses, the United States has received 340 million doses, Japan and Germany have received more than 90 million doses, and France has received more than 80 million doses. In terms of vaccination volume per 100 people, the UK is 126%, China is 120%, Germany is 112%, the US is 104%, and Japan is only 77%. For countries like Indonesia that do not have large-scale vaccine import channels, the epidemic situation The pressure for prevention and control is quite heavy, and there are many similar countries.
In the future, epidemic disturbances will still be a major cause of trouble for the financial market. We must always pay attention to subtle changes in market sentiment during the transaction process until the global vaccine penetration rate reaches a certain level. At a high level, normal economic and trade personnel exchanges around the world have truly resumed as before.
The demand side is still waiting for substantial strength
As expected by the market As such, the supply side and macro level cannot provide obvious bullish support for the time being. If crude oil prices want to continue to rise, there must be help from the demand side. From the current sharp decline in crude oil prices, we can find that the reason why the market is so panic is inseparable from concerns on the demand side.
First, the global economy is facing the possibility of a slowdown in growth. The U.S. GDP in the second quarter was lower than expected. The Chinese economy is facing concerns about an economic slowdown. Many other countries are still under comprehensive blockade. , the market was obviously too optimistic about the control of the epidemic and the recovery of the economy in the past, and the market is currently in the process of expected recovery.
Secondly, in the context of carbon peaking and carbon neutrality, China has begun to tighten crude oil import quotas.��The market is not optimistic about crude oil imports in the second half of the year. Therefore, China’s crude oil demand engine may slow down in the second half of the year, which is also a major negative factor on the demand side.
Judging from the current data, the scale of global refinery maintenance has dropped to a historical low, which also means that refineries around the world are stepping up production, so the current demand side It’s just a difference in expectations, not a difference in reality. In the next month, refineries around the world will still operate at a high operating rate.
Although the U.S. refinery operating rate has declined recently, and its refining input has not returned to historical levels during the same period, it is still at a high level. However, the U.S. market needs to focus on the fact that U.S. crude oil inventories have frequently accumulated in recent weeks. If the seasonal destocking ends early, it will be very distressing for bulls.
Compared with last year, China’s crude oil imports have declined significantly. This year’s import level has remained close to 2019, and the import level in the second half of the year may be lower than in 2019. However, China’s current crude oil processing volume remains at a historical high, and the crude oil accumulated in the early stage is continuously released, using inventory supply to reduce the impact of declining imports.
The demand in the Indian market is not yet optimistic. Although India’s gasoline consumption and diesel consumption experienced a significant rebound in June, India’s crude oil processing volume And import volume is still declining. Currently, India’s crude oil processing volume has fallen to the same period near the epidemic in 2020, and crude oil import volume is also declining.
The positive factors that the demand side can provide are still relatively weak at present. If the increase in demand cannot exceed the increase in supply, the fundamentals will gradually change from a relative shortage of supply to a relative balance between supply and demand, and the effect on prices will be weakened. Therefore, the demand side remains the most important factor in determining whether crude oil prices can ultimately continue their upward trend. If the demand for crude oil continues to slow down in the fourth quarter, and the supply side gradually increases, crude oil prices will gradually weaken in the fourth quarter.
Time is no longer the friend of bulls
This wave of crude oil The price drop has also driven the monthly difference sharply downward, even more pessimistic than the absolute price, especially the WTI crude oil market, which can better reflect the financial attributes of crude oil, indicating that the macroeconomic ground has shown a cautious attitude towards long oil prices. After oil prices return to highs, go long The risk is increasing, which is also an important reason for funds to leave the market.
At present, there are still many uncertain factors, and the wait-and-see sentiment of funds has further increased. However, the current fundamentals are still not bad enough to cause oil prices to fall sharply. When the price fell to the support line, the buying in the market prevented the crude oil price from substantially falling below the important mark of US$70/barrel. The future direction of oil prices depends on whether the market chooses trading expectations or trading facts. If the trading facts are true, oil prices will still maintain a wide oscillation trend.
However, time is not on the side of the bulls. Currently, the only factor that can push crude oil prices upward is the rapid recovery of the demand side. Judging from the current disturbances of the epidemic, this path is difficult and long. The supply side is currently unable to provide too much bullish support to the market. Driven by high oil prices, OPEC+ continues to increase crude oil production. Although shale oil has not yet seen a significant increase, there is a high probability that it will continue to increase production. Macroscopically, the Federal Reserve has been discussing when to tighten monetary policy. To sum up, crude oil prices will still maintain a oscillating trend in August, but will face greater pressure as time goes by.
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