In 2018, international oil prices have attracted the attention of global market participants as always. During this year, with the direction of geopolitics as the main line, international oil prices have been twists and turns, almost perfectly interpreting the "roller coaster" market. For domestic investors, the most special event is that China's crude oil futures finally came out with great enthusiasm. After three quarters of operation, it not only formed a clear coupling relationship with the foreign oil prices, but also developed a unique Chinese market in the details.
The international oil market interprets a "roller coaster" market
Overall, international oil prices mainly fluctuated in the first quarter, climbed in the second and third quarters, and plummeted in the fourth quarter, erasing all the annual increase. As of now, oil prices are still looking to the bottom. Looking at the whole year, the author believes that the US sanctions against Iran are the main logic of the international oil market in 2018, throughout the year.
Specifically, the production cuts of Vienna Group in 2017 led to accelerated destocking of the oil market, and the process began to continue in 2018. However, as market speculations about whether the alliance can persist in production cuts gradually emerged, oil prices entered a three-month repeated fluctuation process. At this time, the news that US President Trump may re-impose sanctions on Iran will undoubtedly inject a shot in the market. Oil prices ushered in a strong wave of rises from April to early May (the eve of the US announcement of sanctions on Iran) and broke through the volatile range. Middle East Geopolitical crisis has always been the focus of market attention. Although the ultimate goal and path of the US sanctions on Iran are not yet clear, this news is enough to open up a large upward imagination space for investors. Afterwards, Trump officially announced that he would impose sanctions on Iran in early November, which would benefit the market from conventional profit-taking after the implementation, but he has found a relatively solid support bottom.
As the long process of waiting for the sanctions to truly enter the implementation stage, oil prices once again entered a repeated fluctuation in the past quarter until mid-September. At that time, under pressure from the United States, Saudi Arabia was facing the dilemma of whether to increase production urgently, and the market also focused on whether the Vienna Group, led by it, could timely make up for the potential supply gap caused by Iran's sanctions. After the Vienna meeting, which was widely watched at the time, Saudi Arabia withstood the pressure from the United States and refused to increase production rapidly, which made the market's expectations that the Iranian incident would lead to a shortage of supply in the Middle East reach a climax, and oil prices were able to break through the previously lasted for a quarter and reach the highest point of the year.
So-called seeing him rise up a tall building, seeing him entertain guests, and seeing his building collapse. Before the carnival could continue, it ushered in a dramatic reversal. Entering the fourth quarter, oil prices plummeted, erasing all the annual gains within half a quarter, and there are still no signs of stabilization. As for the reasons for the sharp drop in oil prices this time, as mentioned earlier in an interview with a reporter from " China Petroleum News ", the author believes that there are two main reasons. First of all, as the US stock market, which has unstable foundations, finally collapsed, the global macroeconomic officially entered a negative feedback cycle in the public eye, which greatly affected the confidence of investors. The funds with a strong bullish atmosphere quickly left the market. The author noticed that most of the predictions of oil price turnover this year are analyzed from a macro perspective. Secondly, echoing the main logic of the previous rise in oil prices, as the day of sanctions was approaching, the United States suddenly changed its previous tough attitude, hinting that it would exempt some countries and regions. Then, it formally exempted almost all of Iran's major export countries and regions in stages, and oil prices accelerated their decline.
With the phased easing of the geopolitical crisis in the Middle East and the bursting of the speculative bubble caused by it, market participants finally began to face up to the deterioration of fundamentals in the past six months. According to the OPEC html May report, the global crude oil production in April was 97.89 million barrels per day, and the global crude oil production in October was 99.76 million barrels per day, with an increase of 1.87 million barrels per day. Previously, the market's concerns about Saudi Arabia's rapid increase in production by 2 million barrels per day now seem mostly nonsense. At the same time, as investors' understanding of fundamental deterioration becomes deeper, oil prices still cannot stabilize. Therefore, the author believes that the most valuable lesson that investors can learn from this year's oil market is to clearly understand how market sentiment can "cover the sky with one hand" and completely cover up fundamental trends.
Understand the past without advice, and know the future can be pursued.The inverted V-shaped twist of international oil prices was unexpected to the market, but it was not too late to adjust the research and investment strategies in a timely manner. Looking ahead to 2019, the author believes that oil prices are still not optimistic. From the macro perspective of successfully predicting the decline in oil prices this year, the world economy has entered a tightening cycle of negative feedback that cannot be reversed in the short term, and oil prices are difficult to turn around in this context. From a fundamental perspective, the US shale oil, which has caused several sharp drops in oil prices in recent years, has not had a strong presence this year due to transportation bottlenecks. However, with the oil market returning to fundamentals after the bubble burst, U.S. shale oil has long been scheduled to have a major role. I believe that it will return home with a full load of oil pipes and docks, and then it will hit the shaky oil market hard.
Shanghai crude oil futures emerged from "Chinese characteristics"
Since its listing in March, China crude oil futures listed on Shanghai International Energy Trading Center have attracted much attention. Through the three quarters of operation, Shanghai crude oil futures and Brent crude oil futures have a high degree of coupling, but compared with the distinctive characteristics of internal trading varieties. A simple summary is that it is easy to rise but difficult to fall. Shanghai crude oil futures rose significantly stronger than Brent in the third quarter, while its declines were even more moderate in the fourth quarter.
There are roughly three reasons for this phenomenon. First of all, the current speculation of crude oil in the domestic market is still at a relatively high level, while speculators in the domestic market like rising but not falling. Secondly, against the backdrop of tightening international trade situation and slowing economic growth this year, the pressure on the depreciation of the RMB exchange rate continues to exist. Again, when the contract changed month in September this year, there was a phenomenon of long short squeeze due to various reasons, which to a certain extent exacerbated the significant divergence of the internal and external oil price trends at that time.
Looking forward to the domestic crude oil futures, as the industry participation still needs to be improved, the contract has a low level of reflection on the fundamentals of the domestic oil market, and the idea is still based on "foreign market price + exchange rate factors". After almost a year of listing, Shanghai crude oil futures trading activity is eye-catching. The survival of contract varieties is no problem, and it has driven the "rebirth" of fuel oil contracts. The functions outside of its investment tools are largely realized by industrial institutions entering the market. I believe that although there are many thorns in the future, the future will surely be bright. (Yao Yang, crude oil analyst at Beijing Branch of Everbright Futures)
1/7
Easy cold weather occurred frequently in the United States at the beginning of the year
At the beginning of this year, strong cold air invaded North America many times, and large areas of the United States in the central and western, eastern and southern regions have experienced extremely cold weather. The most powerful low temperature in at least 50 cities broke the record on January 7. Among them, the lowest temperature in New York City was minus 15 degrees Celsius, breaking the low temperature record of minus 14.4 degrees Celsius in 1896 and becoming the coldest day in 118 years.
2/20
Venezuela begins pre-sale of " oil currency "
htmlOn February 20, Venezuela begins pre-sale of its commodities-backed cryptocurrency "petroleum currency". Maduro The government hopes that the country's launch of this cryptocurrency will help it conduct financial transactions and avoid Western sanctions. Venezuelan regulator said on February 16 that the digital currency will attract investment from Qatar , Türkiye and other Middle Eastern countries, as well as European countries and the United States. Venezuela's crude oil production fell by 29% in 2017, and many people are worried that an accelerated decline in crude oil production will increase the possibility of Venezuela's debt default.3 March 8
The United States increased taxes on imported steel and aluminum products
March 8, US President Trump signed an announcement to impose high tariffs on imported steel and aluminum products. The United States will impose a 25% tariff on imported steel and a 10% tariff on imported aluminum products. The tariff measures will take effect 15 days later. This trade protection measure in the United States has been widely opposed at home and internationally.
3 March 13
Trump lifted Tillerson Secretary of State
On March 13, U.S. President Trump announced through Twitter that he would remove Tillerson from his position as U.S. Secretary of State and appointed then director of the CIA Pompeo to take over the post.
3 March 21
Feder hikes for the first time this year
March 21, the Federal Reserve's Monetary Policy Committee FOMC meeting passed unanimously, deciding to raise interest rates by 25 basis points, raising the federal funds target interest rate range to 1.5%-1.75%, consistent with market expectations. This is the first interest rate policy decision since Powell became the chairman of the Federal Reserve and the first rate hike this year.
3 March 26
China crude oil futures officially listed
March 26, China crude oil futures officially listed on the Shanghai International Energy Trading Center. China's crude oil futures have attracted international attention with four highlights: "international platform, net price trading, bonded delivery, and RMB denominated". However, if you want to become a crude oil futures brand comparable to WTI and Brent, China's crude oil futures still have a long way to go.
April 14
US, Britain and France launched air strikes on Syria html
April 14, the U.S., Britain and France launched more than 100 cruise missiles and air-to-surface missiles to Syrian military and civilian facilities from the air and sea, causing several Syrian civilians to be injured.
April 26
Chinese crude oil futures perform better than Oman
April 26, one month since China's crude oil futures were listed, the average daily trading volume was 63,500 lots (bilateral), which is still lower than the average daily trading volume of Brent crude oil futures on the London Intercontinental Exchange's Brent crude oil futures, but it has exceeded the Dubai Commodity Exchange's Oman crude oil futures with an average daily trading volume of 8 million barrels.
May 8
U.S. withdrew from Iran nuclear agreement
May 8U.S. President Trump announced that the United States will withdraw from the Iran nuclear agreement and restart sanctions on Iran that are exempted from the Iran nuclear agreement. In a subsequent statement, the White House said the restarted sanctions will target key economic areas such as Iran's energy, petrochemicals and finance.
May 20th
Maduro was re-elected Venezuelan President
On the evening of May 20th, the Venezuelan National Election Commission announced that the ruling party Unified Socialist Party candidate and current President Maduro was re-elected to the President of Venezuela.
June 13
Feder hikes for the second time this year
June 13, the Fed announced that it would raise the target range of the federal funds rate by 25 basis points to the level of 1.75%-2%. This is the second rate hike this year by the Federal Reserve. Since the launch of this round of interest rate hike cycle in December 2015, the Federal Reserve has raised interest rates seven times and has launched a balance sheet reduction plan to gradually withdraw from the ultra-loose monetary policy introduced after the financial crisis.
June 14
LibyaArmed conflict has led to a reduction in crude oil production
June 14, fierce armed conflict broke out in the "Oil Crescent Zone" of the oil-producing zone in eastern Libya. A spokesperson for Libya's national oil company said that attacks on two ports in eastern Libya caused one-quarter of the country's crude oil production facilities to be closed.
June 20
Canada 1 oil sands project facility unexpectedly suspended production
June 20, Canada's Syncrude oil sands production facility with a daily output of 360,000 barrels was unexpectedly suspended, resulting in a sharp drop in WTI price compared with Brent oil price discount. Syncrude oil sand production terminals have caused Canadian crude oil supply to tighten and reduced the amount of crude oil flowing into Cushing, Oklahoma, the United States. Suncor, the largest shareholder of the
Syncrude facility, said on July 6 that the facility resumed part of its production in July, about 60% to 70% of its production capacity in August, and full production resumed in September.
June 22
OPEC reduced the execution rate of production cuts to 100%
June 22,OPEC announced that from July 1, the total production cut execution rate of countries participating in the reduction of production will be restored to 100%, that is, to increase production at the current crude oil production level. As the meeting results were lower than expected, international oil prices rose by more than 3%, WTI prices closed up 4.6%, and Brent oil prices returned to $75 per barrel.
August 10
Turkish lira plummeted
August 10, the Turkish local lira suddenly fell nearly 14% against the US dollar, and the Turkish stock market also fell 2.31%.Since then, the Turkish lira has continued to fall, breaking 7 at one point, setting a record low, and the lira exchange rate rebounded after the Turkish central bank intervened. High inflation rates, expanding current account deficits and large foreign debt burdens indicate deterioration in Türkiye's economic fundamentals, which is the root cause of the lira's plunge.
August 20
U.S. plans to sell strategic oil reserves
August 20, the U.S. Treasury Department announced that it will release 11 million barrels of oil from the U.S. Strategic Petroleum Reserves (SPR) in case of sales before Iran's sanctions are implemented, with delivery dates from October 1 to November 30. The sale appears to be intended to show that the Trump administration is taking measures to curb rising energy prices before sanctions. However, as U.S. crude oil production is already ridiculously high, releasing SPR is unlikely to drop retail oil prices.
September 7
China crude oil futures first delivery
September 7, China crude oil futures SC1809 contract successfully completed delivery, with a total delivery volume of 601,000 barrels of crude oil and a delivery amount of 293 million yuan (unilateral). The first batch of futures crude oil used for delivery are distributed in three designated delivery warehouses, namely Dalian China Petroleum Bonded Depot , the Cezidao Oil Depot of Zhoushan Branch of China Petroleum and Chemical Corporation and the Bonded Depot of Zhanjiang Branch of China Petroleum Fuel Oil Co., Ltd.
September 26
Feder hikes for the third time this year
September 26, the Federal Reserve's Monetary Policy Committee FOMC announced a 25 basis point interest rate hike, updating the federal funds target interest rate range to 2%-2.25%, the highest since 2008. The policy statement shows that the Fed is more optimistic about the economy, believing that the labor market and economic expansion are both "strong", reiterating the rough balance of risks facing the outlook.
October 2
Saudi journalist Khashoggi's murder case continues to ferment
October 2Saudi journalist Jiamal Khashoggi , who works for the Washington Post in the United States, disappeared after entering the Saudi Consulate in Istanbul, Turkey to receive relevant marriage information. After investigation, Turkish government officials claimed that there was recorded evidence that Khashoggi entered the embassy and was arrested and then killed and dismembered. Subsequently, the case continued to ferment as more information was continuously disclosed.
October 23
Saudi oil production is close to its historical highest level
October 23, the "Future Investment Initiative" conference opened in Riyadh, the capital of Saudi Arabia. Saudi Energy Minister and Saudi Aramco Chairman Falih said at the meeting that the country has raised oil production to 10.7 million barrels per day, close to an all-time high. Saudi Arabia has the ability to reach 12 million barrels per day in three months to make up for the supply gap brought about by the U.S. sanctions on Iran's energy industry.
11-5
U.S. restarts sanctions on Iran
November 5, US Secretary of State Pompeo and Treasury Secretary Mnuchin announced that they would fully restart the sanctions against Iran that had been lifted in the comprehensive nuclear agreement. Countries and regions such as China, South Korea, India, Japan, Italy, Turkey, Greece, and Taiwan, China have temporarily been exempted and can still import Iranian oil.
11/6
U.S. midterm election results were released
November 6, the results of the 2018 U.S. midterm election results were released. The vote results were in line with the pre-election forecast. The Democrats took the majority of the House of Representatives and the Republicans defended the Senate.
December 3
Qatar announced that it will withdraw from OPEC
December 3Qatar announced that it will withdraw from OPEC in January next year. Qatar official said that the reason for "withdrawal" is "not political", but it is just "I hope to focus on natural gas mining", especially liquefied natural gas production. Qatar Minister of State for Energy Affairs Saad Kabi explained on December 16 that one of the reasons for "withdrawal from the group" is that some members of the U.S. Congress are promoting legislation on the "2007 Oil-free Production and Export Cartel Act". Once the bill takes effect, OPEC may face a series of antitrust lawsuits.
December 7
OPEC decided to reduce production by 1.2 million barrels/day
The highly-watched OPEC meeting was held in Vienna from December 6 to 7 Beijing time. Major oil-producing countries announced at the meeting on the evening of the 7th that they agreed to the "Production Reduction Alliance" to reduce production by a total of 1.2 million barrels/day. In terms of production cut quota, OPEC will cut production by 800,000 barrels per day, while non-OPEC will cut production by 400,000 barrels per day.
December 19
Feder hikes for the fourth rate this year
December 19, the Fed issued a statement of the FOMC interest rate resolution and an economic expectation report, announcing a 25 basis point interest rate hikes to the range of 2.25%-2.5%, close to the 2.5%-3.5% neutral interest rate bottom area estimated by decision makers. This is the fourth rate hike this year and the ninth rate hike since interest rates began to normalize in December 2015. The statement also hinted that the Federal Reserve will raise interest rates twice in 2019; the median forecast shows that the federal funds rate can be 2.9% by the end of 2019. (Related information is provided by China Petroleum Economic and Technological Research Institute and compiled by reporter Wang Yuan)
Author: Yao Yang
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