International crude oil prices, which once rose sharply this year due to geopolitical risk factors, fell back to the level before the war between Russia and Ukraine.
As market concerns about the economic recession continue to heat up, poor energy demand outlook has once again become the main factor affecting the trend of oil prices. Brent crude oil price fell below the $90/barrel mark, WTI crude oil also hit a low of nearly 8 months, and the market bearish expectations are still continuing.
Inventory exceeds expectations and increases impact on oil prices
Although oil prices once rebounded due to news that OPEC+ will implement production cuts in October, expectations of sluggish demand still put pressure on the crude oil market.
WTI closed at $81.94 per barrel on Wednesday, down $4.94 from the previous trading day, a drop of 5.69%. Brent closed at $88.00 per barrel, down $4.83 from the previous trading day, a drop of 5.2%. The SC2210 crude oil spot contract fell 19.6 yuan in the night trading to 670.1 yuan per barrel, a drop of 2.84%.
Affected by the sluggish international oil prices, on September 8, fuel and crude oil on the domestic futures market led the decline in market , and chemical commodities rose and fell. On that day, the main contract for crude oil futures 2210 closed down 3.6%, with a cumulative decline of 7% in the past two days.
Data released by the American Petroleum Association (API) on Wednesday showed that U.S. crude and distillate stocks rose, while gasoline stocks fell. U.S. crude oil inventories increased by about 3.6 million barrels in the week ended September 2, gasoline inventories decreased by about 836,000 barrels, while distillate inventories increased by about 1.8 million barrels.
Business Club analyst Xue Jinlei believes that the market has generally expected crude oil inventories to drop slightly. The increase in crude oil and refined oil inventories exceed expectations means that the risk of market demand decline will gradually be exposed after the North American driving season. Against the backdrop of global central banks' interest rate hikes , concerns about economic recession have increased. Fed rate hike has caused the US dollar to continue to strengthen. At present, US dollar index has broken through the 110 mark, setting a 20-year high, which has reshapeed the valuation of commodity , which is denominated in US dollars, and put a lot of pressure on oil prices at the macro level.
In addition, data released by China Customs showed that crude oil imports in August fell by 9.4% compared with the same period last year, suppressing market confidence. The repeated controls brought about by the epidemic have also dragged down oil demand. Since August, state-owned refineries have undergone a lot of maintenance, the operating rate has declined, and the profit margin has continued to decline, which has once been close to the inversion of wholesale and retail. Local independent refineries have reduced operations and restricted imports, especially as restrictions have been introduced in many places, and gasoline demand has been generally suppressed.
Jinlianchuang analyst Han Zhengji also analyzed that the three major energy consumption regions, Europe, the United States and Asia, currently have their own problems on the demand side. At present, the market generally expects that the European Central Bank and the Federal Reserve will both propose a 75 basis point interest rate hike at the next policy meeting. But more aggressive rate hikes will have a greater impact on market inflation in the short term and curb economic growth, which will drag down fuel demand growth and lead to a decline in oil prices.
The crude oil market is still facing downward pressure
Since June, international oil prices have continued to fluctuate and decline, and have completely repented on the increase of this year . But most analysts believe that under the expectations of a recession, the decline in oil prices has not yet bottomed out.
"Although OPEC+ lowered the crude oil production quota in October, the decline of 100,000 barrels per day is not enough to affect the crude oil supply pattern. In the case where it is difficult to see a significant positive for the supply side, the negative pressure on the demand side will still lead to pressure on oil prices to remain low." Han Zhengji believes that negative factors such as the expectation of Iranian crude oil returning to market and the rise of the US dollar index to a high in the past 20 years will also increase the negative pressure on crude oil in the short term. It is expected that the oil price may continue to bottom out of in the short term. Taking WTI as an example, it is expected that the crude oil price trend in September may fluctuate between US$75-95/barrel.
Guosen Futures analysis, the market will turn its focus to the expectation of interest rate hikes by the Federal Reserve and the European Central Bank and expectation of recession of global economy . Data released on Tuesday showed German factory orders fell for the sixth straight month, adding to concerns about the outlook for economic growth. In addition, in order to control inflation, the expectation of the United States to continue to raise interest rates in September is also high, and the US dollar continues to strengthen, which puts great downward pressure on commodities and US stock markets.Technically, WTI crude oil price has fallen below the important support position of US$85, and the market may continue to fluctuate and fall in the future.
Although the short-term market focus mainly shifts to the recession level, Xue Jinlei believes that starting from the fundamentals of supply and demand , the supply in the oil market is still tight, especially in the context of the continued rise of the " energy crisis " in Europe. In addition, after the implementation of the maximum price limit for Russian oil by the European and American economies, it will further aggravate the energy shortage of EU , thereby raising the prices of crude oil in North America and Europe, and the oil prices will not hover at low levels for too long.
However, he also pointed out that in the later period, in addition to the shrinking demand caused by the economic recession, the supply side also has certain risks, and we need to pay attention to the progress of the Iranian nuclear negotiations. If the Iranian nuclear agreement is implemented, Iranian oil will return to the international market in the near future, and oil prices will still face pressure.
Editor: Peng Bo
Proofreading: Gaoyuan
