21st Century Business Herald reporter Peng Qiang Beijing report After experiencing a one-day plunge of more than 10%, the crude oil market has stabilized and rebounded again.
Many investment institutions pointed out that under the premise that the current information in all aspects is still unclear, the previous plummeting of oil prices was just "overshocking". All parties also have different opinions on whether the subsequent crude oil price forecast will be stable in the long term or weak.
At the upcoming meeting of oil-producing countries, in the face of the impact of the new crown mutant strain on the global society and the subsequent supply and demand changes in the crude oil market, Organization of Petroleum Exporting Countries and its allies of oil-producing countries (OPEC+) are expected to continue to maintain a cautious attitude.
"Omickron" impacted the crude oil market
The recent crude oil market has once again demonstrated its unpredictable and confusing characteristics.
Previously, in the face of rising national oil prices and high domestic oil costs, the United States joined forces with several oil consumer countries around the world to invest in strategic oil reserves , hoping to suppress oil prices, but this trick did not work. The United States released its strategic oil reserves less than market expectations, and the release time was slightly delayed, so international oil prices rose against the trend.
After that, the attack of the new crown mutant strain caused the oil market to rebound rapidly and strongly after experiencing a plunge.
On November 26, World Health Organization held an emergency meeting to name Omicron, a mutant strain B1.1.529, which was first discovered in South Africa. According to , the virus still has great uncertainty in its transmission, potential immune escape ability and clinical manifestations.
The emergence of the new crown mutant strain has brought panic to the market. Many hedge funds are worried that the situation in the early stage of the outbreak will appear again, and sell all risk assets regardless of costs, including crude oil futures long positions , which has also led to a sharp drop in oil prices.
On November 26, international oil prices plummeted by more than 10%, setting the largest single-day decline since April 2020; on that day, WTI crude oil futures closed at US$68.15 per barrel, a drop of 13.1%; Brent crude oil fell 11.6%, closing at US$72.72 per barrel.
But after a weekend, international oil prices rebounded strongly, and the WHO's new warning to Omickron also failed to stop this momentum.
WHO said on November 29 that the overall global risk related to the Omickron mutated new coronavirus strain was evaluated as "very high". At present, the mutant strain has been discovered in many countries such as Europe and Africa, and many countries have also adopted stricter entry restrictions.
On Monday, oil prices opened sharply higher, Brent crude oil opened nearly 3%, and WTI crude oil futures opened nearly 5%, and gradually stabilized thereafter. At present, WTI crude oil futures have stabilized above US$71/barrel, and Brent crude oil futures are stabilized above US$74/barrel.
plunge is just "overshocking"?
The market is more sensitive to emotions and wind direction. Sometimes, even if the news is not sure, you must first sell crude oil, and then carefully study the actual impact of the epidemic. This amplifies the fear of facing the unknown outlook for the epidemic.
Everbright Futures pointed out that based on the joint stockpile of consumer countries, the market has the expectation of slowing down the pace of production increase in response to this week's OPEC+ meeting. At the same time, the spread and toxicity of the new crown mutant strain are still under study, and many institutions believe that the market may be overreacting.
In addition, Germany suspended the certification of Nord Stream 2 pipeline. Although some political factors are mixed with, the lack of gas in Europe may provide certain support for oil prices.
, which has always been very optimistic about oil prices, pointed out that the plunge in oil prices last week has nothing to do with fundamentals. In the worst case, it would be reasonable for Brent oil prices to be at $80 per barrel.
Jinlianchuang crude oil analyst Xi Jiarui said that judging from the development of the epidemic in the past two years, the impact of the new coronavirus on oil price trends is uncertain. OPEC+ issued a warning on this November, which is also the reason why OPEC+ organizations have refused to significantly reduce production.
At the beginning of 2020, due to the lockdowns in many places caused by the global pandemic of the new crown epidemic, crude oil demand plummeted. The crude oil inventories in Cushing, the United States were full, leading to a sharp plunge in oil prices. WTI crude oil futures even showed a miracle of "negative oil prices". But since then, with the gradual easing of the new crown epidemic and the strengthening of economic activities in some countries, oil demand has recovered rapidly, and international oil prices have rebounded to their highest level in several years.
Xi Jiarui pointed out that the depth and breadth of Omickron's impact on the future market of crude oil is still unpredictable. With the plummeting oil prices, the probability of OPEC+ canceling its production increase plan is increasing. If the organization does not take action, oil prices may fall below the $70/barrel mark.
Nowadays, the epidemic in Europe has become more serious again. The emerging new coronavirus mutant strain has triggered market concerns about global economic recovery and energy demand. But for now, it will still take weeks for all parties to determine what impact the new variant strain will have on the global economy and oil demand.
Market Focus on OPEC+ Organization Meetings
OPEC+ Organization, which has been cautious about increasing production, was originally scheduled to hold technical committee meetings and ministerial meetings of oil-producing countries at the end of this month and early next month. Its output control policy will have a huge impact on the global crude oil market.
The emergence of Omickron has brought huge uncertainty to the balance of global crude oil supply and demand, and the possible measures of OPEC+ organizations have also attracted much attention from the market.
S&P Global P said, citing people familiar with the matter, the new lockdowns, shutdowns and travel restrictions that may bring about by the new coronavirus mutation will have a huge impact on the crude oil market. At present, many institutions expect that the plummeting oil price may prompt OPEC+ organizations to suspend their production increase plans.
Iraq Oil Minister Abdul Jabbar said that the country currently has no expectations for whether the OPEC+ organization will continue its monthly increase of 400,000 barrels per day crude oil supply plan. Any decisions of the oil-producing countries will be based on information provided by technical experts, who are currently awaiting market reports and results of related research.
CITIC Futures research report points out that it is expected that the benchmark center of crude oil prices may gradually decline in 2022. At that time, the large-scale popularization of vaccines will effectively hinder the recurrence of the epidemic. If the rapid spread of the new coronavirus that breaks through the existing barriers will lead to interruption of economic activities, and a sharp decline in oil demand, bringing additional downward action to oil prices.
Goldman Sachs expects that negotiations on Iran nuclear agreement are slow, and the country's oil supply will not increase in the near future. In addition, OPEC+ organizations may suspend production increase plans, offsetting the new wave of the new crown epidemic and the impact of the release of strategic oil reserves by the United States and others. In short, as the market returns to calm, the longer-term prospects for crude oil prices are expected to remain stable.
For more content, please download 21 Finance APP
