Throughout July, crude oil has been waiting for market variables in disorderly repetitions.
With the decrease in price volatility, the trading volume and open interest in the crude oil market also increased last month. fell rapidly. Taking WTI as an example, the trading volume of the index contract in July fell to a new low in five years, and the open interest fell to a low range in four years. Throughout July, the WTI index fluctuated between 39.38 and 42.82 US dollars per barrel.
The decline in crude oil price volatility is not unrelated to the current major change in market logic. In May, oil prices rose sharply due to OPEC’s production cuts and the release of global liquidity. By July, the logic of production cuts had been fully reflected in prices, but the demand factor has always been a mystery: the market has been uncertain when demand will begin. Recovery as before and whether there will be a second downturn in the future.
In addition, due to the sharp decline in volatility, industrial funds or pure crude oil hedge funds have rarely participated in the battle of the crude oil market. The recent oil price is more driven by macro factors. leading. Therefore, the current fluctuations of international oil prices and U.S. stocks are converging, and sometimes the fluctuations in oil prices may even simply copy the trends of U.S. stocks.
The main logic behind the current stabilization of U.S. stocks at high levels is that the United States continues to release liquidity to support the rise of the stock market. Therefore, we believe that as long as the United States continues to release liquidity, there is no basis for a sharp decline in U.S. stocks. In addition, Sino-US economic and trade relations still need to be focused. In view of the frequent provocations of the United States, we have to respond equally. These political uncertainties are potential risks for the stock market, especially when the new crown pneumonia epidemic in the United States is still severe and the global joint fight against the epidemic Basically hopeless situation.
The trend of gold can better reflect the uncertainty of the current market, so we recommend that investors stick to the bottom line of risk, whether it is speculation or arbitrage. The first half of the year has witnessed too much history, and the second half of the year is likely to continue to witness history. Traditional macro logic and fundamental logic are not worth mentioning in the face of these political risks. Therefore, the market logic that has been repeatedly verified before may become invalid this year. possibility, in short, while adapting to low price fluctuations, beware of the sudden appearance of market variables.
The epidemic may cause the US economy to collapse
The U.S. market is still our focus, especially when crude oil inventories fell sharply by more than 10 million barrels in EIA data last Wednesday. The crude oil market price was unusually calm, indicating that the market is now concerned about fundamentals. They have relatively strong immunity to the good or bad news in the financial market, but they are extremely sensitive to the good or bad news in the financial market. Has the logic of the crude oil market really changed dramatically?
If we look back at history against the background of the global flood, we will find that the crude oil price this year is quite different from the logic in 2008: in 2008, the world experienced a financial crisis , it is simply a big problem at the financial level, which in turn causes problems in other fields to amplify and intensify. What the world is experiencing this year is a public health incident, which has caused economic problems and problems in various fields. As far as purely economic issues are concerned, with concerted global efforts, it can still be saved through monetary and fiscal policies. When there is no vaccine for public health events and the epidemic is poorly controlled, it is actually more difficult to stop the pace of economic downturn simply through fiscal policy or monetary policy.
The most typical examples are China and the United States. Due to early detection and early response, China’s epidemic control is basically nearing completion, and its economic recovery will have greater support. China’s second quarter Economic data has turned from negative to positive, with economic growth exceeding 3%. It is one of the few countries that has emerged from the “quagmire”. The economic growth data in the second quarter of the United States is simply terrible. The second quarter GDP growth rate announced last week plummeted by 32.9% year-on-year, creating the largest decline in the history of the United States; the number of people continuing to apply for unemployment benefits in the United States exceeds 17 million. , continues to remain at an ultra-high level; the final annual sales rate in the United States in the second quarter was -29.3%, and the quarterly personal consumption expenditure rate was -34.6%. No data can excite the market. This is the huge impact of effective epidemic prevention and control on economic development.
Although the U.S. economy will not remain weak, as the market describes it, the elevator goes down and the stairs go up. Although there will be an upward trend, the speed of recovery will be greatly reduced if the epidemic is not properly controlled. In addition to the epidemic, internal conflicts in the United States are also intensifying. The two parties have continued to disagree on certain issues due to the election. This makes it difficult to use the power of the state machinery to fight the epidemic.
The confusing operations of American politicians on the epidemic issue
Due to the epidemic situation in the United States,Due to the epidemic policies, Trump’s inaction, indiscriminate command, and the laxity of some American people in epidemic prevention and control, the epidemic in the United States is close to getting out of control.
In the U.S. Census Bureau’s weekly “Pulse of Households” survey, nearly 30 million Americans experienced not having enough to eat during the week ending July 21. That’s the highest level since the survey began in early May. The COVID-19 epidemic has plunged the U.S. economy into a severe recession and millions of people have lost their jobs. Currently, the unemployed can receive an additional $600 in weekly benefits from the federal government, but this benefit application will expire at the end of July, and the US Congress is discussing a new rescue plan.
In this case, the U.S. Senate Majority Party (Republican) leader McConnell also declared that mandatory wearing of masks in the Senate is unnecessary. Trump has only recently compromised on the issue of masks, encouraging everyone to actively wear them. The reason why the United States is so tough on the issue of masks is that the main production capacity of masks is in China. The United States must not only contain China, but also cooperate with China on epidemic prevention issues. This huge psychological gap is the operation of American politicians. It is the existence of this mysterious operation that gives the epidemic the conditions to become a pandemic in the United States.
The background for the release of liquidity is completely different
From the perspective of historical experience, this time is different from the global flood of 2008, when China was the bottom of the world. The result of the massive release of water was the rapid recovery of the global economy, the rapid recovery of demand, and the abundance of funds, and the oil price soared. In this global water release, there is more water, but the economy may not be able to recover. In the absence of demand support, even if there is a large release of water, the room for oil prices to rise is limited, and the marginal utility of water release is actually diminishing. This is The biggest difference from 2008.
So it is particularly important when a vaccine appears. Therefore, under this background, it is difficult for oil prices to rise significantly. Thanks to the continued implementation of OPEC+ production cuts and the recent continued weakness of the U.S. index, crude oil prices can “hover” in the range of 40-45 US dollars per barrel. But at present, the time advantage is not on the side of the bulls. In terms of seasonality, we are currently in the peak season of seasonal demand for crude oil. After the peak season, demand will likely decline further. Therefore, if the bulls cannot effectively break through at this time, they will be hit later. more difficult. It would be ideal for OPEC to maintain oil prices in the range of 40-50 US dollars per barrel. Unless a vaccine can be successfully released and the problem of the global epidemic out of control is solved, there will be obvious pressure on oil prices.
From another aspect, the relationship between China and the United States The game has triggered various market expectations, such as gold prices breaking through historical highs and silver prices rising sharply. The strength of gold reflects the current uncertainty in the market, especially the direction of Sino-US relations. As for oil prices, we are currently in a relatively turbulent period, and the international market is likely to have things we cannot predict. Therefore, even if it oscillates endlessly, we cannot relax our vigilance, especially to prevent Trump from seeking re-election as the election approaches. Create more trouble.
As mentioned above, the current crude oil market is not very responsive to changes in fundamentals. After all, the logic of the supply side has been fully reflected in the price, and the logic of the demand side is actually Looking at the logic of the macro market, if the macro is good, demand will naturally not be bad. Therefore, the focus of the study and judgment of future market conditions needs to be on the financial market.
The game between China and the United States will greatly affect the trend of financial markets, especially the stock market. Therefore, if you want to see clearly the context of the crude oil market, you need to focus on the dynamics of U.S. stocks. </p
