Recently, crude oil prices have rebounded to a certain extent both internally and externally. Market participants said that the sharp rebound in oil prices in both internal and external markets was due to the fact that the U.S. CPI data fell more than expected in November, and the market risk appetite continued to improve, superimposed on the marginal improvement on the actual supply and demand side.
International oil prices rose significantly on Wednesday. As of the close of the day, the main contract of WTI crude oil futures rose by US$1.89/barrel and closed at US$77.28/barrel, an increase of 2.51%; the main contract of Brent crude oil futures rose by US$2.02/barrel and closed at US$82.70/barrel, an increase of 2.50 %.
Data released by the U.S. Energy Information Administration (EIA) on Wednesday showed that U.S. commercial crude oil inventories increased by 10.231 million barrels in the week ended December 9, compared with expectations for a decrease of 3.595 million barrels, and the previous value fell by 5.186 million barrels.
“After the oil price continued to fall sharply, short-selling energy has been fully released, and there is a need for short-term oil price self-repair. In addition, the most worrying factor in the early stage of the market is weak demand. With the optimization and adjustment of China’s epidemic prevention and control policies, the world’s largest crude oil import Expectations for the restart of domestic crude oil demand have returned to the market, and judging from the performance of the domestic refined oil market in recent days, the market has relatively strong expectations for this. As market sentiment picks up, oil prices have begun to rebound. The U.S. CPI data released on Tuesday was low It also further increases the expectation that the Federal Reserve’s interest rate hike will slow down, and the slowdown in interest rate hike will also help the market sentiment to recover.” Yang An, head of energy and chemical research and development of Haitong Futures, said.
According to Zhang Zhengze, an analyst at the Guohai Liangshi Futures Research Institute, the reason for the rebound in oil prices in the internal and external markets is the improvement in the real-side supply and demand margin, coupled with the promotion of macroeconomic sentiment. It can be seen that the unilateral and near-term monthly differences in the market and the cracked price of refined oil have strengthened simultaneously. He further explained that there are two reasons for the phased improvement in supply and demand on the real side: First, the keystone pipeline problem, Cushing may continue to destock, resulting in a narrowing of the Contango structure of WTI’s near-end monthly difference; second, the natural gas in the European market has entered destocking In this stage, the impact of weather changes on the depletion slope of natural gas is again traded, driving primary energy prices to strengthen. From a macro perspective, the U.S. CPI data in November was lower than expected, and market concerns about subsequent interest rate increases have eased.
In addition, the reporter noted that data from the American Petroleum Institute (API) showed that in the week ending December 9, U.S. crude oil inventories increased by approximately 7.8 million barrels, far exceeding market expectations. Analysts expected inventories to decrease by 3.6 million barrels. In this regard, Yang An said that this is an obviously negative data, but judging from the market reaction during the day on Wednesday, it is not sensitive to it. This shows that investors are not very concerned about this short-term supply and demand data, but are more concerned about supply and demand in the future. levels of interpretation. At present, the expected recovery in demand, including from China, will have a greater impact on oil prices, so the rebound in oil prices is expected to continue in the near future.
“A very important reason why the U.S. crude oil inventory pressure is not high this year is the high operating rate of refineries, and the reason why the operating rate of refineries remains high is the high profits of refined oil products in Europe and the United States. But judging from the trend, with the increase in interest rates, the terminal demand for crude oil has increased. The lagging effects are beginning to appear, and it will be difficult for subsequent refineries to maintain the high profits in the early stage, and refineries will most likely be difficult to show super-seasonal high operating rates. The negative feedback logic on the demand side of refined oil will be transmitted to the demand side of crude oil through the operating rate of refineries. This will lead to accumulation of crude oil storage. Unless the price goes down further and squeezes out supply, such as OPEC+ cutting production more intensively, the pattern of gradual accumulation of crude oil in the future will be changed,” Zhang Zhengze said.
OPEC’s latest monthly report released on Tuesday lowered its crude oil demand forecast for the first quarter of next year. In addition, the internationally renowned investment bank Goldman Sachs also significantly lowered its crude oil price forecast for the first half of next year. In this regard, Yang An said that OPEC has maintained a relatively cautious assessment of demand in the past period of time because it has noticed the pressure that the global economy will face next. In addition, OPEC’s early plan to reduce production by 2 million barrels per day made the United States and other consumer countries dissatisfied. In order to alleviate this situation, OPEC has been providing explanations for its production reduction, and lowering demand is obviously the most powerful support for its decision to reduce production. Goldman Sachs lowered its oil price expectations due to realistic pressure. The sharp drop in oil prices is obviously a “slap in the face” for its previous judgment that it continued to sing a bullish tone. After this round of oil prices continued to plummet and the overall structure weakened, Goldman Sachs had to make a decision on its forecast. Adjustment.
According to Huang Liunan, a futures analyst at Guotai Junan, OPEC’s demand forecast is relatively subjective and is not the core of market transactions. Most of the time, the crude oil derivatives market is traded more around the economic context under the influence of the global debt cycle. OPEC’s lowered demand forecast may be a potential positive for oil prices in the future, because OPEC’s pessimistic judgment on demand may lead to greater production cuts. Overseas investment banks such as Goldman Sachs have a certain reputation in the crude oil market, but this does not mean that their analysis is accurate. Many overseas investment banks have a long-term research perspective, which is different from the focus of domestic futures traders, so there is no need to over-interpret it.
“In fact, it is relatively certain that the demand for crude oil will weaken in the first half of next year. This is also the negative demand feedback logic of the current short trading. At present, the logic of weakening demand for refined oil products in Europe and the United States may continue to exert pressure in the first half of next year.There is uncertainty about oil prices and when China’s demand will bottom out and rebound. It is necessary to keep a close eye on high-frequency leading indicators such as domestic travel data. Judging from leading travel indicators, China’s crude oil procurement demand will remain weak for more than a quarter. Extending the time cycle, in the second half of next year, as overseas interest rates move from an interest rate increase cycle to an interest rate cut cycle and the domestic epidemic situation is likely to gradually stabilize, crude oil demand may once again form a positive driver for oil prices. “Zhang Zhengze said.
The improvement of the macro environment has provided momentum for the rise of international oil prices in the short term. Yang An said that the U.S. CPI data for November basically confirmed that the stage of the greatest inflationary pressure in the United States has passed, and most of the subdivided data showed signs of weakening, which means that U.S. inflation data will continue to fall in the future. “The direct impact of the fall in inflationary pressure is to slow down expectations for the Fed to raise interest rates, which is good for the performance of risky assets. But before the Fed stops raising interest rates, it means that liquidity will remain tight, which is detrimental to economic recovery. From this perspective, it will It will put pressure on the commodity market, so the market will carefully observe the game between the subsequent changes in the US CPI and the downward pressure on the economy. The same is true for the impact on oil prices. It depends on investors’ reaction to it and changes in market sentiment, etc.” He said. explain.
Zhang Zhengze said that the stage of greatest inflationary pressure in the United States may have passed, but the stage of negative impact on oil prices has not. The process from the Federal Reserve starting to raise interest rates to increasing financing costs for businesses and individuals to suppressing terminal demand for crude oil and refined products takes time. Therefore, the market has two sets of logics when trading interest rate hike cycles as a drag on oil prices, namely the logic of expectations and reality. . In the initial stage of interest rate hikes, the market will trade in expectations that interest rate hikes will bring about weakening demand. For example, from June to July this year, while the crude oil market fell unilaterally, the near-end monthly differential performance was relatively strong. When interest rate hike expectations gradually approach the Fed dot plot, interest rate hikes may gradually enter the final stage, and the market will trade the impact of interest rate hikes on actual demand. At this time, the expected swing has less influence on oil prices. For example, since November this year, crude oil has At the same time as the unilateral decline in the market, the near-end monthly difference also fell sharply, and the decline became more fierce. The near-end monthly difference drove the market price to weaken, and the current negative feedback logic of real-side demand has not yet ended.
“Looking forward to 2023, the global crude oil market demand growth is almost certain to slow down, and there are still disagreements about whether it will fall into recession. The trend of U.S. CPI is an important observation indicator. In the face of historical-level inflationary pressure, the market needs to face in 2023 The main downside risks are still the same as in 2022, that is, the risk of deflation due to tightening liquidity. The fall in CPI in November may herald the emergence of this pattern. Of course, considering the uncertainty of the Federal Reserve’s tightening policy, what exactly is the It is not clear whether stagflation will continue or deflation, but at the end of inflation, there is a high probability that the commodity market will repeatedly trade price drops under the risk of deflation, and constantly correct the expected difference.” Huang Liunan said, considering the impact of previous interest rate hikes on the economic downturn It has always been difficult to predict accurately. There will still be many variables in domestic and overseas monetary policies in 2023. It is difficult to predict the pace of the direct impact of credit tightening on crude oil reality and expectations. The in-depth interpretation of the stagflation pattern and the uncertainty triggered by geopolitical risks have made it more difficult to judge demand. That is, whether inflation will fall quickly or slowly still needs to be observed, and it is not advisable to make premature conclusions.
Huang Liunan believes that if the pace of CPI decline in the United States and Europe is very sharp and drives the market to trade deflation risks in advance, oil prices are likely to still face huge downward pressure in the first half of 2023, and even hit a full-year low. If the pace of the fall in CPI in the United States and Europe is relatively moderate, the negative transmission to oil prices will be relatively mild. At that time, the trading perspective of the crude oil market may return more to the supply and demand side, and the center of gravity of oil prices may still remain in a long-term position while inflation falls but does not enter a deflationary pattern. High position. Under this circumstance, even if oil prices may fall due to a periodic trading recession or tightening, under the tight supply and OPEC+ production reduction support pattern, the low period will not last particularly long, and the average price decline will be limited.
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