Since April 2020, when international oil prices fell to less than US$20 due to the global pandemic of the new coronavirus pneumonia epidemic, crude oil prices have begun to rise.
In the second half of 2020, oil prices rose to around US$40 and began to stabilize. Market demand did not pick up, and crude oil gradually lost its upward momentum.
But after entering 2021, crude oil prices began to rise again along with US stocks and other commodities. From this time on, the price of crude oil began to be divorced from actual demand.
WTI New York Crude Oil CFD
Geographic factors have caused several “oil crises”
Historically, geopolitical factors are the main reason for the surge in crude oil prices.
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In 1974, the Arab oil-producing countries were dissatisfied with the long-term low oil prices of Western countries led by the United States and their support for Israel in the Fourth Middle East War, so they joined forces to reduce production and increase prices. Crude oil suddenly rose from about US$3/barrel to US$10. /bucket, more than doubled at once.
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After the Iran-Iraq war started in 1978, Iraq and Iran accounted for about 1/10 of global crude oil production capacity, and crude oil prices rose from US$13/barrel to US$35/barrel.
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After the Gulf War broke out in 1990, it affected nearly 20% of the world’s oil production capacity. International oil prices once reached a 40% increase in one trading day, reaching a maximum of 42 US dollars per barrel.
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The 2003 Iraq war also pushed up crude oil prices, from $25/barrel to more than $90/barrel.
Therefore, according to this logic, when it comes to the recent rise in oil prices, everyone will take it for granted that the main reason is attributed to geopolitical factors such as the Russia-Ukraine war.
It is true that Russia, as a major crude oil exporter, will have an impact on oil prices if it falls into a war, but we must also see that after the war began, India, China and other countries’ crude oil imports from Russia did not decrease but increased. More importantly, crude oil prices had been rising steadily before the Russia-Ukraine war started.
Addicted to money printing, COVID-19 exacerbates inflation
After the COVID-19 epidemic, the productivity of major international manufacturing countries, except China, has been greatly hit. Even though many countries have relaxed epidemic prevention measures, productivity levels are still difficult to return to before the epidemic. In order to maintain the normal life of residents, a large number of developed countries have chosen to “print money.”
As the most important chemical raw material, crude oil’s demand in the market is positively correlated with international productivity levels. However, as demand shrinks, oil prices have been rising. It can be said that oil prices have deviated from normal economic laws.
Major oil-producing countries, led by OPEC, continued to tighten production capacity at the beginning of the epidemic, but tightening is easy and difficult to loosen. Today, after the epidemic has gradually recovered,the demand for crude oil is increasing day by day, but increasing production is like squeezing out toothpaste. Oil-producing countries are Make a lot of money.
The man-made supply and demand situation, coupled with the current poor economic situation, has caused hot money in the market to move towards commodities that can maintain their value, pushing crude oil to the forefront.
The current situation is that as soon as there is any disturbance in the market, the price of crude oil will rise. Even if there is no good news, the market will copy a few good news.
If we look at fundamentals, artificial supply and demand tension and inflation in oil-producing countries are the biggest fundamentals.
“Boss Cloth” works for “Boss Oil”
In the crude oil market, there is a “fight between gods and gods”, but it is the physical production companies that are unlucky.
Take the textile industry as an example. The most commonly used raw material for chemical fiber in the weaving industry is petroleum. Trucks that want to transport goods use petroleum, and evenWhen Boss Zhibu goes out to run his business, he still consumes oil. As oil continues to soar, hard costs such as raw material prices and freight are rising rapidly.
No way, oil is too important in modern industry, but if it weren’t so important, there wouldn’t be so much money pouring in.
If the price of raw materials rises, but the end demand does not rise, it will ultimately only compress the profits of textile companies. Judging from what we have learned recently, you don’t even need to make money.As long as the order can be guaranteed, most textile companies will take it. However, the looms on the market are still not full. Water jet looms in Jiangsu and Zhejiang areas The operating rate is already less than 70%.
It can be said that what the “oil bosses” earn is the hard-earned money of the “cloth bosses”!
As oil-producing countries increase production, can oil prices drop?
On June 2, local time, the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil-producing countries, known as “OPEC+”, held their 29th ministerial meeting via video. The meeting concluded that adding oil in July and August The scale of large-scale production increase has increased from 400,000 barrels/day per month to 648,000 barrels/day per month.
This was originally a negative for crude oil prices. However, on the day the news came out, international oil prices rose instead of falling.
For oil-producing countries, maintaining high oil prices is the most profitable for them, so they may continue to increase production, but without strong external force, it is very difficult for them to actively increase production to suppress oil prices.
Therefore, the editor predicts that this round of production increases by oil-producing countries may cause a certain price drop in crude oil in a short period of time. However, if the artificial supply and demand tension is not resolved and inflation is not alleviated, it will be difficult to reverse the upward trend of oil prices in the long term. .
For textile companies, if the price of polyester raw materials drops in a short period of time due to crude oil, there may be a trough in the price of polyester raw materials in the future.
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