This week, crude oil prices continued their strong trend, with Brent crude oil reaching its highest point close to US$52.5/barrel and continuing to move towards the strong pressure level of US$53/barrel. , the decline in crude oil prices caused by the epidemic has recovered most of the losses, and the market once again demonstrated the strength of the bulls.
There are three main reasons why crude oil prices are so strong: First, the expectation of a vaccine, although there is no demand on the demand side. Although the global epidemic is still raging, vaccine injections have brought unlimited hope to the market, especially after some politicians in the United States began to gradually receive vaccines; second, the expectations of the spot market, the global procurement boom has risen again, and huge Purchasing power has pushed up spot discounts, and the monthly spread structure of oil prices has turned into a contango structure in recent months, which can partially explain the near-end strength; third, global macro expectations are improving, and the Federal Reserve has stated that it will continue its low interest rate policy By 2023, a weak U.S. dollar will give the commodity market the confidence to push up. At present, the U.S. dollar index has fallen below 90. According to market expectations, there is still room for continued decline in the future, so there is no basis for a sharp decline in crude oil prices.
In addition, last week’s EIA data was significantly negative, but crude oil prices did not fall. , has shown us the strength of the bulls, and the decline in EIA crude oil inventory data this week failed to give the shorts another opportunity.
As for the future crude oil price trend, we believe that short-term market risks are still relatively large, and we need to Pay attention to the trend of the U.S. dollar index. After falling for such a long time, once the U.S. dollar index shows a short-term repair recovery, crude oil prices will see a short-term decline. If Brent prices can return to around $45/barrel, Then strategic investment customers can choose opportunities to make arrangements at market lows.
The global epidemic has not improved in the short term
Although the United States The vaccine has begun emergency approval for use, and all walks of life in the United States have begun to gradually inject vaccines. However, judging from the development of the global epidemic, short-term vaccines are still unable to prevent the rapid spread of the virus. As of December 18, the number of new confirmed cases worldwide reached 729,000, setting a new high again, and the cumulative number of confirmed cases reached 74.6 million. Among them, the number of new diagnoses in Asia reached 104,000, and the trend shows signs of gradually rising; the number of new diagnoses in Europe reached 177,000, and the trend is gradually stabilizing; the number of new diagnoses in Africa reached 19,000, and the number of confirmed diagnoses has increased significantly recently. ; The number of new confirmed cases in the Americas reached 298,000, still setting new highs. By country, the number of newly confirmed cases in the United States has reached 193,000, and the efficacy of the vaccine cannot be seen in the short term; the number of confirmed cases in the United Kingdom has surged to 35,000. In addition, according to the latest news, French President Macron has been diagnosed with COVID-19, and the spread of the global epidemic is still serious.
Although vaccines have supported the recent strength of oil prices to a certain extent, only It may be difficult to maintain oil prices at a relatively high level with the expected support, and the market needs to see substantial improvement in demand. After the Pfizer vaccine in the United States was announced to be widely available, full vaccination has begun, and US Vice President Pence will also be vaccinated. However, the scope of vaccination is still limited at present. It is difficult to see the effect of the vaccine on controlling the spread of the epidemic in the short term, so it will still take time. Especially countries other than the United States that have not yet received vaccines.
WHO officials said that by the end of 2021, high-risk groups around the world should be able to get vaccinated For vaccines, large-scale population vaccination requires waiting 12 to 24 months after high-risk groups are vaccinated. Some experts pointed out that we cannot place all our hopes on vaccines at present. Public health prevention and control measures are still necessary and cannot be relaxed. Therefore, the recovery speed of demand may not be as optimistic as we imagined.
It is precisely because of the impact of the epidemic that institutions have lowered their demand expectations for next year. The IEA monthly report is also not optimistic about the short-term vaccine market. The IEA said it would take months for vaccines to have an impact on demand, and only if enough economically active people have been vaccinated. The IEA also predicts that as the year-end holidays approach, more COVID-19 cases will appear, and it is not ruled out that Europe and the United States will adopt more stringent blockade measures, which will be a huge blow to short-term crude oil demand. The IEA monthly report is also relatively pessimistic about next year’s crude oil demand, lowering it by about 170,000 barrels per day. The main reason is that changes in office methods have reduced the number of people traveling.
Historical reference for current market conditions
Although the demand side shows no signs of recovery in the short term, the Federal Reserve announced that the United States will…��Maintain a low interest rate policy. Low interest rates are an important basis for global commodities to continue to rise. Therefore, in the confrontation between the demand side and the macro level, the macro level is the key to affecting crude oil prices. Even if demand recovers slowly, as long as macro liquidity If the U.S. dollar index continues to fall, crude oil prices will have the basis to rise further.
Goldman Sachs Group’s global head of commodities research said in a Bloomberg TV interview that commodities Commodities have “all the signs” of a super cycle, with a lower dollar helping to push commodity prices higher and the market entering a “virtuous cycle” again.
Comparing the market trend after 2000, the U.S. dollar index has fallen sharply. The lowest dropped from above 120 to 70, which was also the key to the crude oil price soaring from below US$20/barrel to above US$140/barrel at that time. The problem is that the year 2000 was a period of recovery for global crude oil demand. The combination of the macroeconomic “water release” and the rapid rebound in demand allowed oil prices to soar into the sky. Although this round of market also has the conditions for a big “water release”, demand has not recovered in the short term, so the short-term upward pressure is still relatively obvious. But if demand recovers and favorable factors at the macro level are combined, will the crude oil market do something big?
After comparing the current market with the market in July this year, we found that the current The market situation was similar to that at that time. Technical indicators diverged after a sharp rise. However, the bulls steadily controlled the market situation, and the price always maintained a pattern of slight oscillation and upward movement. This situation continued until the epidemic showed huge variables. There was a wave of decline only after Trump was diagnosed with the new crown.
Another period of relatively long consolidation was the first quarter of 2017, when crude oil The price also consolidated in the range of 50-60 US dollars per barrel for nearly three months. Later, the crude oil price began to fall after consolidating, and the crude oil price finally ended the entire consolidation market with a decline. The reason why crude oil prices were able to fall was directly related to the uncertainty of the OPEC production reduction meeting at that time. However, in the end, the OPEC meeting reached an agreement and crude oil prices restarted a new round of magnificent gains.
Judging from these two market trends, prices usually end the consolidation trend in a downward manner after long-term consolidation, but this also requires the cooperation of fundamentals. After sorting out the current fundamental situation, it can be found that it seems that only after Biden takes office and lifts sanctions on Iran and Venezuela, and the production capacity of these two countries is put into the market, can a relatively large negative effect be created. Otherwise, the price of crude oil will increase. The probability will be consolidation within a narrow range, waiting for the market to break through further.
The United States is the first country to start planning for full vaccination, so its crude oil demand It has also become the focus of market attention. From a data point of view, the demand for refined oil products in the U.S. market amid the raging epidemic is relatively average. After a large-scale decline, gasoline demand has rebounded to near the historical lows of the same period, and there is still relatively large room for recovery. Diesel demand has returned to the same period in history, but the performance Still not ideal. On a year-on-year basis, gasoline consumption has fallen by more than 10% year-on-year, and diesel consumption has fallen by nearly 10% year-on-year. Therefore, the market is waiting for the demand side to stabilize and improve after the vaccine becomes popular.
As for the current oil price, we believe that there will be some pressure in the short term, but in the medium and long term, prices will continue to rise. It is highly likely that the price of Brent crude oil will exceed 60 US dollars per barrel next year. event. Therefore, if there is a certain degree of correction in short-term oil prices, long-term investors can actively seize the bargain hunting opportunity of short-term market decline and prepare for the continued upward trend next year.
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