Since November, oil prices have come down from their highs. Quotes. On the one hand, from a macro perspective, the continued strength of the US dollar has dragged down oil prices to reshape their valuations. More importantly, there have been some changes in the fundamental expectations of supply and demand. From the previous strong energy demand and tight supply, it has gradually transformed into an improvement in supply and demand brought about by the recurrence of epidemics in Europe and the expected release of oil reserves globally, and oil prices have continued to fall in response.
According to monitoring, since November, international crude oil WTI has fallen by 6.23%, and Brent crude oil has fallen by 4.11%. As of Wednesday, international oil prices have experienced another round of heavy losses. The settlement price of the main U.S. WTI crude oil futures contract was US$78.36/barrel, a decrease of US$2.19 or 2.7%, and the settlement price of the main Brent crude oil futures contract was US$80.28/barrel. , down $2.15 or 2.6%. Oil prices tumbled to near six-week lows.
Specifically:
First of all, in the context of the continued strength of the US dollar, in addition to lowering the valuation of crude oil. Risk preferences in the global financial market have changed, risk aversion has intensified, and the prices of safe-haven assets such as gold and silver have risen. Risk assets including the stock market and commodities represented by crude oil are under pressure.
More importantly, supply expectations are changing, and what we can see is that the Biden administration in the United States has been working hard to lower oil prices. Biden has repeatedly urged the Organization of the Petroleum Exporting Countries (OPEC) to increase production, but OPEC has remained unmoved. However, faced with the pressure of high domestic inflation, the U.S. government has not given up. Early market rumors that the United States will release crude oil inventory reserves may become a reality. Data show that the current strategic reserve inventory in the United States has reached the lowest level since June 2003. The strategic reserve inventory decreased by 3.2 million barrels last week, which also shows that the United States has begun to release strategic reserve inventories to lower oil prices.
In addition, the United States has also put pressure on many countries, requiring India, Japan and South Korea to release oil reserves, and has indicated that it may release crude oil reserve stocks by selling or borrowing them. It is reported that the White House will require the Department of Energy to implement the replacement agreement. The large-scale replacement of oil reserves may bring the current oil delivery volume in the United States to 30 million barrels. The U.S. Department of Energy may also accelerate the sale of 18 million barrels of crude oil. As soon as this news came out, it became a “depth bomb” put into the market. In addition, affected by the resonance of the increase in new cases of the epidemic in Europe, oil prices fell sharply.
In terms of inventory data, the U.S. Energy Information Administration (EIA) data on Wednesday showed that crude oil inventories decreased by 2.1 million barrels last week, gasoline inventories decreased by 700,000 barrels, and refined oil inventories decreased by 820,000 barrels. Full-bore inventories fell by more than 3 million barrels. At the same time, U.S. crude oil production decreased by 100,000 barrels, and exports increased by 570,000 barrels per day. U.S. crude oil exports were the highest for the week since August, which is also a major factor in the decline in inventories. The positive inventory data did not help oil prices, indicating that energy demand is still strong and energy tension has not been completely relieved. Against this background, the market is generally worried that the United States’ intention to continue to suppress oil prices is still strong. On the contrary, it brings impetus to expectations of cooling oil prices.
Looking at the market outlook, the oil market is still anxious about long and short prices in the short term, and the supply and demand game dominates. European natural gas prices have soared again due to delays and expectations of lower delivery volumes due to another mishap at the Russian pipeline Nord Stream 2. Crude oil supply is expected to remain tight. In the later stage, it still depends on whether the release of global oil reserves can make up for the gap, and supply-side variables are still there. In addition, there will also be a long-short game on the demand side. During the global economic recovery, energy demand remains strong. However, repeated epidemics and rising inflation in the United States will also suppress demand. All things considered, the oil market is likely to be more volatile in the short term due to the impact of the news, especially against the backdrop of expectations that the Biden administration will release oil reserves. The oil market remains bearish.
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