After consolidating for more than a month, last Wednesday, the crude oil market finally ushered in the long-awaited breakthrough, but the sudden upward attack still surprised many people. In fact, after such a long period of consolidation, oil prices have indeed reached a point of direction selection. Last week, Brent oil prices increased by 2.24%, WTI oil prices increased by 2.89%, and SC prices fell by 3.28%.
The reason why oil prices suddenly increased , in fact, the logic is also easy to understand, but these bullish logics have been suppressed by the market for too long and have not been released. At present, the macro market uncertainty is relatively strong, but overall it is still bullish. The fundamentals maintain strong support for the price upwards. The technical aspect is currently in an oscillating pattern, waiting for the market to choose a direction. In this case, both macro and fundamental factors support the upward price movement, so it is logical for bulls to launch an attack. However, macro-negative factors continue to linger above the oil market, and the attack ultimately fails.
Specifically, the current level of panic in the market has exceeded that of most log periods in history. With the COVID-19 epidemic still so serious, the game between China and the United States has intensified. , Trump continues to provoke China on various issues, which has aggravated the tension and made investors more cautious. In addition to sanctioning ZTE and Huawei, Trump has also begun to ban TikTok and WeChat. Pompeo’s “Clean Network” plan is another manifestation of the escalation of the technological confrontation between China and the United States. The United States’ rude closure of the Chinese consulate is a clear demonstration of its arrogance and bullying. Pompeo stated that China’s mobile phone applications, cloud computing, communications, submarine cables, etc. will be banned and removed from the United States.
It is foreseeable that before the US election, the Chinese factor will still become a tool for US politicians to win votes. This kind of macro market uncertainty is also the most uncontrollable risk in future crude oil trading.
The United States has behaved arrogantly and unreasonably recently, but that does not mean that the United States will continue to confront China on the issue. We all know Trump’s Some of the vote warehouses are in agricultural states, which attach greater importance to agriculture. Judging from Pompeo’s recent mention of the first-phase agreement between China and the United States, Trump still wants to win over the votes of these agricultural states, and the best way to win these votes is to urge China to purchase large quantities of American agricultural products. Therefore, Trump now not only wants to cooperate with China on anti-epidemic issues and agricultural product purchase issues, but also wants to suppress China in technology. Therefore, we must pay close attention to the trend of Sino-US relations. Once there is an easing, it will be a relatively strong positive support for the crude oil market and the global commodity market.
In 2018, Trump tried his best to suppress China on trade issues and forced China to compromise. Now this strategy of extreme pressure It’s happening again. We all know that during the “trade war”, China responded calmly, effectively defused the US offensive, and changed from passive defense to active offense. Regarding the current confrontation between China and the United States, the United States actually has no way out, but it also has no absolute confidence that it can defeat China, so various extreme pressures will take turns.
We also admit that China is at a disadvantage on some key issues, such as technology and financial payments. But in the long run, we still firmly believe that the US strategy will fail. From the perspective of internal circulation and dual circulation at home and abroad, China is actually ready to deal with the maximum pressure from the United States. Therefore, no matter how the United States makes a “moth” in the future, we do not need to panic. The time is now on China’s side.
From a liquidity perspective, there is currently ample liquidity in the U.S. market and the global market. Last week, the Federal Reserve continued to purchase government bonds beyond expectations to support the economic stimulus policy. The U.S. dollar index has reached a minimum of 92.5 The price of the U.S. ten-year Treasury bond has already broken through the high point in the past 15 years, and the price of the two-year Treasury bond has also reached a historical high. Under such market conditions, oil prices actually fluctuate slightly within the range, which itself shows that there is a certain degree of market uncertainty. The problem.
One of the biggest differences between this year and 2008 is that the world experienced an economic crisis in 2008, which triggered variables in other fields, while this year the market experienced a public health crisis The incident, due to the fermentation of the epidemic, caused huge economic problems. The economic crisis can be improved through economic stimulus, but public health emergencies can only be completely solved with the emergence of a vaccine. That’s why the world has released so much money this year, but commodities have stabilized after rebounding from low prices and did not rise sharply like in 2008.
In addition, the U.S. stock market has remained strong recently, with the Nasdaq index hitting a new high.�The Dow Jones Index is struggling to rise, which is an optimistic expectation of funds for liquidity and an optimistic expectation of future economic recovery. We have found that the recent correlation between the U.S. stock market and crude oil prices is very high. Therefore, as long as there are no major problems in the U.S. stock market in the short term, there is no basis for a sharp decline in crude oil prices. As the United States continues to release liquidity to stimulate the market and Trump’s purpose of maintaining the stock market’s rise remains unchanged, it is difficult to see signs of a decline in U.S. stocks in the short term.
Fundamentally, the market is also worried about the difficulty in recovering demand behind the epidemic. Judging from the data, except for China, crude oil demand in other regions has not recovered, and there is still a large gap from the same period in history. However, due to the efforts of OPEC+, the global market is still in a state of tight supply and demand. The latest data shows that OPEC’s production in July is relatively satisfactory, and Iraq has stated that it will also make up for its production reduction plan. The supply side has provided upward momentum for oil prices.
The reason why oil prices rose rapidly last Wednesday was mainly because the explosion in Lebanon detonated crude oil market sentiment. The big explosion in Lebanon was no less powerful than a small nuclear bomb, which triggered market speculation about geopolitical friction and caused investor sentiment to fluctuate. Therefore, oil prices chose the right time to go up at this time, which is also the moment of least resistance.
After the big explosion, although we don’t know if there is any conspiracy behind it, it can be expected that some countries may use this matter to make a fuss, so the tension surrounding Iran Geopolitical friction is also the focus of our recent attention.
In 2020, we are all saying that the world is currently in an era of major changes unseen in a century, and the current crude oil price has also seen greater uncertainty due to the changes. In addition to the epidemic this year, the game between China and the United States is also an important factor affecting market sentiment. In the future, we may also pay attention to geopolitical issues in the Middle East. According to the latest research report of the RAND think tank, the United States urgently needs a small-scale battle of a controllable scale to pull the economy out of the quagmire. This also reminds us that although the United States has been severely affected by the recent epidemic, it cannot rule out issues in the Middle East. What to do.
Overall, after experiencing severe fluctuations in the first half of the year, crude oil prices tended to have low volatility in the second quarter. As the U.S. election approaches in the third and fourth quarters, more unexpected things may appear. Therefore, investors should still operate with caution to avoid another “black swan” attack. Since oil prices chose to break upward last week, it shows that the market still has the possibility of rising. However, from a technical point of view, WTI oil prices are close to the 200-day pressure level, and Brent oil prices are close to the 200-day pressure level, and there is still heavy pressure above. If the short-term price can effectively stand above the 200-day moving average, the upside space will be opened. If the breakthrough does not occur, the price will continue to oscillate around the short-term platform.
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