On Thursday (Thursday), the early trading of US oil traded around US$87.14 per barrel; oil prices fell for the third consecutive day on Wednesday, due to continued concerns about demand, strengthening the US dollar and expectations for the main central bank's further rate hike. At the same time, U.S. crude oil inventories increased, and OPEC lowered its forecast for global oil demand growth in 2022, which also dragged down oil prices.
html within 4 days, the number of initial unemployment claims for the US CPI annual rate in September, the number of initial unemployment claims for the week ending October 8, and the EIA data, and the IEA released its monthly crude oil market report.
negative factors affecting oil prices
[U.S. crude oil inventories soared by about 7.1 million barrels last week]
U.S. Petroleum Association (API) data said that U.S. crude oil and gasoline inventories increased last week, while distillate inventories fell. In the week ending October 7, crude oil inventories soared by about 7.1 million barrels. Gasoline stocks increased by about 2 million barrels, while distillate stocks decreased by about 4.6 million barrels.
[16 top universities economists in the United States and Britain support setting an upper limit on Russian oil prices]
16 economists from top universities in the United States and Britain told U.S. Treasury Secretary Yellen that the cap on Russian shipping oil delivery prices that the United States and G7 countries are setting may significantly reduce Russia's revenue and prompt Moscow to continue to produce oil.
Economists including Simon Johnson of MIT's Slong School of Management, Jason Furman of Harvard University and Ryan Kellogg of the University of Chicago said in a letter to Yellen that the price ceiling agreed in principle by G7 last month should be able to reduce Russia's oil revenue by strengthening the negotiated status of buyers.
They wrote in their October 11 letter: "While we do not expect all transactions to be based on price caps, its existence should significantly enhance the bargaining power of private and public sector entities that buy Russian oil." U.S. officials said Tuesday that work on the measure is continuing.
These economists wrote that the price cap would be able to maintain economic incentives for Russia, allowing it to continue to produce at current production while reducing its revenue. They pointed out that in April 2020, when Brent crude oil approached $20 per barrel, Russia still supplies oil to the world market because this price is higher than the production costs of many or most of Russia's existing oil fields. Currently, the price of Brent crude oil is about $96 per barrel. Russia will have less revenue due to the “Ural Discount” that reflects the impact of Russia’s invasion of Ukraine, but the discount has shrunk in recent weeks.
They said: "The proposal of an oil price cap will effectively promote the institutionalization of Ural discounts, thereby further reducing the dollar value of the Russian government's main source of income."
U.S. Deputy Secretary of Energy David Turk said that the United States has hundreds of millions of barrels of oil in its strategic oil reserves, and Washington will try to use these reserves responsibly if it makes sense to stabilize the market. Asked if the administration is considering limiting fuel exports, Turk added that President Biden did not rule out any possibility when addressing the high energy costs.
[If a deep recession strikes, oil prices may fall below $60]
According to the forecast data of RBC Capital Markets, as the global economy is in a deep recession, Brent crude oil prices may fall below $60 per barrel by mid-2023. The financial institution outlines three different prospects while noting that the current forecasting levels are challenging.
RBC said in a report on October 12 that with all factors tending to be positive, Brent crude oil prices are expected to reach US$115-120 per barrel by mid-2023.
In the case of macroeconomic weak but favorable fundamentals, Brent crude oil price is expected to reach US$90-95 per barrel during the same period; however, in the case of a deep recession, Brent crude oil price may fall below US$60 per barrel around mid-2023.
RBC said in a review of the market drivers in the third quarter: "It is not advisable to keep a close eye on the trend of oil prices, and the efforts it puts in may be useless." These factors include "crazy macroeconomics, policy paralysis, insufficient liquidity and turbulent trend lines".
Citi expects the average price of Brent crude oil to be $101 per barrel in 2022 and $88 per barrel in 2023; the average price of US crude oil is expected to be $96 per barrel in 2022 and $83 per barrel in 2023. OPEC+ production cuts trigger a dangerous tit-for-tat reaction between Europe and the United States, and the consequences may be far-reaching.
[OPEC lowers global oil demand growth forecast for 2022]
The Organization of Petroleum Exporting Countries (OPEC) lowered its global oil demand growth forecast for 2022 in its monthly report, the fourth cut since April, while also cutting forecasts for next year, citing economic slowdown, epidemic factors and high inflation. OPEC expects oil demand to increase by 2.64 million bpd in 2022, or 2.7%, down 460,000 bpd from previous forecasts. Demand will increase by 2.34 million barrels per day next year, 360,000 barrels per day less than the previous forecast to reach 102 million barrels per day. OPEC still expects demand in 2023 to exceed pre-pandemic levels in 2019.
[Recession concerns increase, US stocks fluctuate and close lower]
US stocks closed slightly lower on Wednesday, with intraday trading fluctuating as Fed 9 meeting minutes show that policy makers agree that they need to maintain a more restrictive policy stance. September minutes also showed that many Fed officials stressed the cost of not doing enough to reduce inflation. Recent market weakness has been linked in part to investors' growing concerns that the Fed's aggressive rate hike could put , the world's largest economy, into recession. Interest-rate-sensitive utility stock fell 3.4%, while real estate stocks fell 1.4%, leading the decline among all sectors of the S&P 500 index . Quincy Krosby, chief global strategist at
LPLFinancial, said in a recent speech, Fed officials "unanimously stated that the Fed is committed to curbing inflation and will stick to it. There is now an understanding that the Fed will continue to raise interest rates. The question for the market is now, when will it go from 75 basis points to 50 basis points and 25 basis points. I think that's the focus of the market." At the September meeting, Fed officials raised interest rates by the third consecutive 75 basis points in an effort to pull inflation down from a 40-year high.
market rebounded after opening, as data released earlier showed unexpected rises in producer prices in September. Labor Department 's producer price index (PPI) rose 8.5% in the 12 months to September, slightly higher than the estimated 8.4%. However, it is still below 8.7% in August.
Thursday's US consumer price report is considered more critical, and investors have been waiting anxiously. At the same time, the U.S. third-quarter financial report season will also kick off, and some major U.S. banks will release financial reports on Friday. The S&P 500 Financial Stock Index closed down 0.3%.
Among the rising stocks, Pepsi (PepsiCoInc) jumped 4.2%, after the soft drink maker raised its annual revenue and profit forecasts as demand for soda and snacks remained firm despite multiple price increases.
Aluminum Corporation (AlcoaCorp) jumped 5.3%. A person familiar with the conversation told Reuters that the Biden administration is weighing restrictions on Russian aluminum imports and that the U.S. government is considering a possible response to Moscow's military escalation in Ukraine. ? The ratio of stocks to rise on the New York Stock Exchange is 1.64:1; Nasdaq market is 1.15:1.
Popular factors affecting oil prices
[United Nations passed a resolution to condemn Russia, and the West will provide Ukraine with more air defense weapons ]
United Nations General Assembly passed the resolution with an overwhelming advantage, condemning Russia's attempt to annex four regions of Ukraine. 143 of 193 members voted in favor of a resolution saying Moscow's move was illegal and deepened Russia's international isolation. Only four countries voted against the resolution with Russia.After Russia launched a intensive missile attack on Ukraine, more than 50 Western countries held meetings in Brussels , promising to provide more military assistance to Ukraine, especially air defense weapons.
[U.S. producer prices increased by more than expected in September]
The Labor Department announced that U.S. producer prices rebounded by 0.4% in September, an increase of more than expected by 0.2%. However, due to further improvement in the supply chain, the core producer price index was the weakest in the past two and a half years, bringing some hope to the anti-inflation battle. The report also shows that it may be difficult for producers to pass on price increases, with indicators that measure changes in wholesalers and retailers' profits rising hardly in September. The price increase of intermediate products and services is not large. The prices of commodities deducted from food and energy have not changed, which is the lowest level of the so-called core commodity price index since May 2020.
[ Putin : Russia will not compromise with the West]
Russian President Putin delivered a speech at the International Forum on the 12th, saying that although he was sanctioned by the West, Russia will not compromise and will continue to ensure energy security and stability.
Putin pointed out that Russia is one of the main players in the global energy market. Russia's oil and natural gas are among the forefront of the world in terms of mining and export volume, as well as electricity and coal production. Although Russia has been subject to sanctions and sabotage from the West in the field of infrastructure, it will not compromise. Russia will continue to ensure energy security and stability and cooperate with those countries interested in it.
Overall, although oil prices are supported by the continued escalation of geopolitical tensions, U.S. crude oil inventories have increased significantly. OPEC lowered its global oil demand growth forecast and the impact of the strengthening of the US dollar. In the short term, oil prices have strong short term. If the EIA data again shows that inventory increases again in the evening, oil prices still have room for downward in the short term.
This article is from Huitong.com
