Back on the morning of November 1, if someone predicted that Brent oil prices would rise from US$35/barrel to US$49/barrel, no one would believe it. However, affected by factors such as bullish macroeconomic data, expectations for the success of vaccine development, and geopolitical conflicts, the crude oil market did stage a “tremendous reversal” in November. International oil prices counterattacked from the collapse state when Europe was closed due to the epidemic, and rose this month. It reached nearly US$14/barrel, an increase of 28.71%, comparable to the oversold rebound in May.
In early November, the global epidemic suddenly broke out, and the crude oil market was enveloped in a pessimistic atmosphere. The front-month contract of Brent crude oil fell to as low as US$35/barrel, and the price of WTI oil was seen as low as US$30/barrel or even lower. Market sentiment is in a state of collapse. Subsequently, good news about vaccine development spread frequently, and crude oil prices began to rebound, returning to 40-46 US dollars per barrel.
At the end of November, the crude oil market was detonated by a bomb from the Houthi armed forces. Brent oil prices soared, strongly breaking through the important pressure level of 46 US dollars per barrel. Subsequently, Shanghai crude oil futures were ignited to make up for the increase. In the end, Brent oil prices recovered all the losses since Saudi Arabia’s “price war”, reaching the $50/barrel mark!
OPEC+ has not stopped pushing up oil prices. According to market news, despite the rebound in oil prices, OPEC+ still decided to postpone the implementation of the production increase plan originally scheduled to start in January next year by three months, giving the crude oil market Provides more motivation to go long. Towards the end of the year, China’s buying interest has revived, and the efforts of the supply side have made the entire crude oil market tight. The monthly difference structure of Brent crude oil has returned to a premium pattern in recent months after a lapse of seven months, and market expectations are more optimistic.
In addition, changes in wind direction at the macro level have also pushed up the financial market. The Dow Jones successfully broke through the 30,000 mark at the end of this month, and the Nasdaq hit a record closing price. At the same time, the U.S. dollar index fell sharply, and the market was confident in the release of liquidity after Biden took office. Safe-haven assets performed generally, and gold and silver fell out of favor.
Amid the turmoil in the oil market, geopolitical risks are heating up again. On November 27, local time, the Iranian Ministry of Defense confirmed that Mohsen Fakhrizadeh, a senior nuclear physicist and head of the Ministry of Defense’s research and innovation agency, was attacked and died after rescue efforts failed. Fakhrizadeh is Iran’s top nuclear physicist and the “soul figure” of Iran’s nuclear project. Some Western diplomats once called him the future “father of Iran’s nuclear bomb.” Iran said in a letter to the United Nations that there were significant indications that Israel was responsible. Iranian Foreign Minister Javad Zarif wrote on Twitter: “Terrorists murdered an outstanding Iranian scientist today. Significant signs point to Israeli involvement.” He called on the international community to condemn this “act of state terror.” Geographical risks have once again injected enough imagination into the crude oil market.
Vaccines are expected to support short-term oil prices
From the publicly released epidemic data, it can be found that the “out of control” epidemic situation is mainly concentrated in the Americas and Europe. From a time perspective, Europe was the first region to experience a second outbreak of the epidemic. A sudden surge in confirmed cases in October disrupted the original rhythm of the crude oil market. At the end of October, the epidemic broke out again in the Americas, and the crude oil market price fell to US$35/barrel.
At present, it is impossible for foreign countries to imitate China’s epidemic prevention and control methods. The large base and the economic pressure they face make it difficult for them to carry out long-term and large-scale blockades. In this case, vaccines are even more anticipated.
Judging from the recent progress in global vaccine research and development, China, the United States, the United Kingdom and Russia have all achieved good results. The reason why crude oil prices have been so strong since mid-November is related to the announcement of the progress of vaccine development by Pfizer and Moderna in the United States.
Specifically, Pfizer and Moderna in the United States stated that the vaccine can be used for emergency use before the end of this year, and its effectiveness has reached 95%. It is expected that the three American companies will provide 2 billion to 3 billion doses in 2021. of vaccines. China’s vaccines are ready for emergency use, and Sinopharm has recently begun applying for vaccine listing. Data shows that the country will be able to provide approximately 900 million vaccines in 2021, and there is still considerable room for improvement in production capacity in the future. There is also good news from Russia and the United Kingdom, which are expected to provide more than 2 billion vaccines in 2021. Based on this calculation, at least 4.9 billion vaccines will be provided in 2021, and by appropriately increasing production capacity, we can cover the world.
The inhibitory effect of the epidemic on the demand side is obvious to all, and the withdrawal of demand is the first driver of the collapse of crude oil prices. Once the vaccine is fully popularized and global production is on track, retaliatory compensation may lead to an outbreak of economic growth. Therefore, once the vaccine is fully popularized and the economy returns to normal, there will be a huge increase in global crude oil demand. Before the supply side responds, the upside space for crude oil prices will be completely opened.
In the short term, the global epidemic prevention and control situation is still severe. As the temperature in the northern hemisphere continues to drop, the possibility of accelerated spread cannot be ruled out. Therefore, before expectations become reality and before demand really breaks out, crude oil It is difficult for prices to rise significantly, and chasing prices in the short term is risky.
</o:Judging from the situation, it is unlikely that "very fierce revenge will come soon", but it is enough to cause vigilance.
The bullish effect on the inventory side is gradually emerging
Currently, the most obvious performance on the crude oil inventory side is the number of floating tank inventories around the world. At the beginning of the year, under the influence of the epidemic, global floating tank inventories accumulated in large quantities. In my country’s “post-epidemic” period, as demand rebounds, global floating tank inventories with higher inventory costs have fallen sharply. This shows that the changing trend of global crude oil floating tank inventories is closely related to the changing trend of Asian crude oil floating tank inventories. Chinese demand has led to a sharp decline in the inventory side.
Judging from the recent refining input of China’s crude oil and the operating rate of Chinese refineries, the high operating rate of local refining is the most direct reflection of China’s demand. As some large refining and chemical projects continue to commence next year and China’s crude oil import quotas are approved, it is expected that global crude oil floating tank inventories will still have room to continue to decline. In addition, the inventory of floating tanks in the Middle East and the Gulf of Mexico is also relatively low. The inventory of floating tanks in other regions around the world has almost been released. Only around China, there is still a certain amount of inventory. However, this part of the inventory is still being maintained due to the efforts of the OPEC supply side. Will continue to significantly destock.
In addition, it can be seen from the EIA inventory data in the United States that the inventory decline in the second half of the year is very obvious. After the priority is given to destocking at sea, onshore stocks have also declined steadily. In the foreseeable future, the spot shortage caused by the steady increase in demand and the supply side will not change in the short term. It is expected that the inventory side will still have a positive impact on the market.
China’s Shanghai crude oil futures inventory is also one of the important market indicators. In the early stage, the large increase in warehouse receipts suppressed the price increase. Recently, with the narrowing of the monthly difference, the obvious decline in inventory and the obvious strength of the price, the volume of crude oil warehouse receipts has also begun to gradually decline, which is conducive to Shanghai crude oil futures prices getting rid of the weak label. In the future, Shanghai crude oil futures prices may become a direct reflection of China’s demand.
To sum up, under the premise that the global supply side is still tight and OPEC+ strives to maintain strong prices, with the promotion of vaccines, crude oil demand will gradually recover, and the continuous decline in inventories will also support crude oil prices. After Biden takes office, there is a high probability that liquidity will continue to be released, which will also support higher global commodity prices. Therefore, it is expected that Brent crude oil prices will oscillate around the range of 45-50 US dollars per barrel in the short term, and Shanghai crude oil futures prices will also fluctuate accordingly. If the price is below US$45/barrel, strategic investors who have not “jumped in” in the early stage can make steady arrangements. If global crude oil demand recovers more than expected, oil prices are likely to break through 50 US dollars per barrel. </p
