In the first week of February, the crude oil market surged again. WTI crude oil had “five consecutive positives”, with a weekly increase of 9.5%. Brent crude oil reached a maximum of 59 US dollars per barrel, and continued to move towards the target of 60 US dollars per barrel. It is worth noting that this week, international oil prices, U.S. stocks, and the U.S. dollar index all rose. This kind of market has also occurred in history, but it has not occurred frequently.
Although there is a high probability that oil prices will exceed US$60/barrel due to the joint promotion of the supply side and macroeconomic factors, in the absence of a complete recovery of demand, crude oil prices will continue to rise. US$60/barrel is still relatively difficult to push upward as a platform.
The power of vaccines is beginning to gradually emerge
Judging from the recent epidemic control situation, the new crown epidemic has increased The number of confirmed cases has dropped significantly, and the popularization effect of the vaccine has begun to gradually appear. As of February 5, the number of newly confirmed cases worldwide in a single day was 510,000, a decrease of 290,000 compared to the same period last month, and the cumulative number of confirmed cases has exceeded 100 million. Among them, there were 72,000 new confirmed cases in Asia in a single day, a decrease of 11,000 from the same period last month; 164,000 new confirmed cases in a single day in Europe, a decrease of 100,000 from the same period last month; and a decrease of 100,000 in the Americas. The number of new cases per day was 210,000, a decrease of 130,000 from the same period last month; the number of new cases in Africa in a single day was 17,000. Overall, the global epidemic has shown clear signs of an inflection point. It is worth mentioning that the UK, India, and the United States, which were previously severely affected by the epidemic, have all shown obvious signs of decline. Currently, the number of new cases in a single day in the UK has dropped to about 20,000, in India to about 10,000, and in the United States to about 10,000. About 120,000 people.
Judging from the vaccination situation, the cumulative number of vaccinations worldwide has exceeded 100 million doses, an increase of 90 million doses compared with the same period last month. As vaccine production capacity continues to expand and Europe gradually relaxes restrictions on Chinese and Russian vaccines, it is expected that the spread of vaccines will accelerate in the future. This is also the main reason why the macro market has been very optimistic recently.
Judging from the market trends this week, the U.S. dollar index is rising, U.S. stocks are rising, and crude oil prices are rising. The seemingly unusual trends in the market have begun to coexist this week. The main reason is that Financial markets have turned optimistic about global macro expectations. Coupled with the relative strength of fundamentals, crude oil prices hit new highs this week.
The logic of financial markets has changed
This week, crude oil prices rose sharply, and the US dollar index also experienced “five consecutive positives”. At the turning point stage, we can no longer use traditional logic to view the negative relationship between the U.S. dollar index and crude oil prices. In traditional logic, the U.S. dollar index and crude oil prices tend to have more negative correlations, mainly because crude oil prices are priced in U.S. dollars. When the U.S. dollar becomes stronger, it means that fewer U.S. dollars will be spent to purchase crude oil, which is also the endogenous force that drives the price of crude oil down; when the U.S. dollar becomes relatively weak, it means that more dollars will be spent to purchase crude oil. of the U.S. dollar. At this time, the trend of the U.S. dollar will boost prices upward.
But at this stage, Yellen said that U.S. policy will return to the path of a strong dollar. We all know that Biden is actually Obama’s vice president. Biden, who is also a Democratic Party, will most likely continue the policies of the Obama era. His policy line can be seen from Biden’s recent announcement to restore Obamacare and appoint officials from the Obama era. During the Obama era, his strong dollar policy was the most important strategy. However, after Trump came to power, he returned to the weak dollar era. Now that Biden has come to power, there is a high probability that he will implement a strong dollar policy. This is also what Yellen said before. an important reference.
Although in the short term, Biden’s release of $1.9 trillion in liquidity is contrary to the path of a strong dollar, the main purpose of releasing liquidity is to stimulate the economy and make the economy reopen. Back on track, only when the U.S. economy fully recovers can the strong dollar come into play. This is the main reason why the release of liquidity in the United States caused crude oil prices to rise, U.S. stocks to rise, and the U.S. dollar to rise as well.
The market expects that the 1.9 trillion economic stimulus plan, coupled with Biden’s anti-epidemic policy, will bring the epidemic in the United States under good control. Coupled with the rapid popularization of vaccines, the U.S. economy is expected to restored this year. Once the U.S. economy recovers, the Biden administration will have a basis for implementing a strong U.S. dollar policy and recover liquidity through a strong U.S. dollar. After all, most of the fiscal and monetary policies that can be used in the Trump era have been used. The U.S. government The deficit rate has also soared unprecedentedly in the Trump era. There are not many tools available to Biden. Therefore, after 1.9 trillion, the only useful strategy in Biden’s hands is to hope that a strong U.S. dollar will make the U.S. dollar in the international market Accelerate reflow.
Through the return of U.S. dollars, the U.S. economy is back on track again. If the U.S. economy can recover before the economies of other countries, coupled with its strength…If the policy of �� yuan is adopted, some countries with relatively poor ability to resist risks will definitely suffer a huge blow. By then, maybe the U.S. dollar will have a chance to make a wave of gains. If this is the case, then for the United States, a new growth point will be found, and the U.S. economy will be more stable. Therefore, we cannot use traditional perspectives to view the trend between the U.S. dollar and oil prices, including the recent rise in U.S. stocks, which is also the beginning of an era of change after Biden came to power. The traditional operating logic has already changed after Trump stepped down. Just start rewriting.
The supply side is still a favorable guarantee
We have described the fundamentals of crude oil many times. The market consensus is that supply and demand are relatively tight. Saudi Arabia’s voluntary production cut of 1 million barrels per day has once again made the supply side the main force in stabilizing oil prices. Many institutions, including JPMorgan Chase and Goldman Sachs, believe that tight supply will continue to exist in 2021 and crude oil prices will continue to rise. JPMorgan Chase said that due to supply shortages, Brent crude oil prices are expected to exceed US$70 per barrel by the end of this year. Goldman Sachs said that tight oil supply will help oil withstand uncertainty in the financial market. Brent crude oil prices are expected to reach $65 per barrel in July. As the oil market rebalances faster, the crude oil supply deficit will expand in the first quarter. .
The U.S. crude oil market is also different this year. While crude oil prices continue to rise, U.S. production has not shown a significant increase. The rebound has remained within a stable range. In addition, in the past seasonal market, the first quarter was usually a seasonally weak period, and it was also a period of increase in U.S. crude oil inventories. However, this year, U.S. crude oil inventories have not increased significantly, and have even been increasing recently. It shows a downward trend, which also gives bulls a certain confidence in pushing up.
Oil prices have risen so far that it is highly likely that Brent crude oil will break through 60 US dollars per barrel. After the key breakthrough of 60 US dollars per barrel, how high can the market go? Although the spread of vaccines is still accelerating, it is undeniable that demand is not recovering as quickly. We believe that driven by the supply side and macroeconomic factors, the rise in international oil prices to US$60/barrel is within a reasonable range. If we want to continue to push up, I am afraid that it will not work without the demand link. Therefore, in the short term, while investors are cautiously bullish, they should also pay attention to the risks of chasing prices, especially during the period approaching the Spring Festival holiday.
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