The oil price has shown extreme performance for two consecutive weeks, leaving long up and down shadow lines on the weekly chart respectively. The trading volume has shrunk significantly in the past week, and the oil price has experienced extreme view conversion. In the first half of the week, under the influence of the good news of the Russian Ukrainian negotiations and the positive comments of oil producing countries, the market risk appetite continued to cool down, and the international oil price fell sharply following the inertia of the previous week, once falling below the integer level of $100 / barrel, The completion of the withdrawal of the 42% increase in March made many investors feel incredible. As the rumor about oil supply and demand in the Kremlin rose again, it may be difficult for investors to overcome the tense situation in the short-term market after the rumor about oil supply and demand in Ukraine began to rise again. However, with the news about oil supply and demand in the Kremlin rising again, it may be difficult for investors to change the tense situation in the short-term market, The international oil price soared for another two trading days and recovered the $100 / barrel mark, forming a typical reversal trend.
From March 15 to 16, OPEC and IEA successively released their monthly reports, which mentioned that the Russian Ukrainian conflict and the sanctions imposed by western countries on Russia have become increasingly influential on the economy. The impact of the Russian Ukrainian conflict has forced countries around the world to readjust their economic policies to ensure that they can maintain economic development as much as possible while controlling inflation. However, the OECD still judged that the impact of the Russian Ukrainian war may reduce the global economic growth by 1 percentage point, IEA also significantly adjusted its demand outlook for the crude oil market in 2022 and reduced the increase in crude oil demand in 2022 by 950000 barrels / day. The biggest impact on the supply side is the supply loss caused by the obstruction of Russian crude oil export. At present, the market is still paying close attention to the reduction of Russian crude oil supply and whether other suppliers can make efforts to fill this gap. In the face of such an environment as the crude oil market, investors also maintain a high degree of flexibility in the evaluation of oil prices.
The two monthly reports of OPEC and IEA released this week have given some guidance to the market. At present, the supply side is in chaos. According to the latest data released by petro logistics, an oil tanker tracking organization, Russia’s offshore crude oil exports increased in March compared with the previous month. In March, Russia’s offshore crude oil exports increased by 350000 barrels / day compared with February, close to 3 million barrels / day. Petro logistics also observed that many Russian oil commodities have no destination, and more Russian oil seems to be flowing to Asia. Many industry insiders expect that the follow-up impact of Western energy sanctions against Russia remains to be seen. According to the judgment of IEA, Russia may stop oil production of 3 million barrels / day from April. However, there are still different opinions on the final reduction of Russian crude oil exports in the market. Some people in the industry judge that many traders are trying to study the hidden export methods to bypass the sanctions, so the reduction of Russian oil supply may be less than expected in the market. This is also reflected in the recent decline in the discount of the real goods market. Although the supply is still tight, the tension has been significantly alleviated.
According to the OPEC monthly report, OPEC’s oil production in February increased by 440000 barrels per day to 28.47 million barrels per day, exceeding the increase promised under the OPEC + agreement. Since March, member states such as the United Arab Emirates and Libya have called on OPEC to increase crude oil production. However, at present, Saudi Arabia has not expressed its position on this and stressed that it will maintain direct cooperation with Russia. In addition, the market is also paying close attention to the possibility that the United States may lift sanctions on Iran and Venezuela to increase crude oil supply. IEA judged that if Iran reached an agreement, oil exports could increase by about 1 million barrels per day in six months, but this may take several months; In addition, the growth of crude oil supply will come from countries such as the United States, Canada, Brazil and Guyana. According to the EIA report, the US shale oil production in April will increase by 117000 barrels / day month on month to 8.708 million barrels / day, the highest level since March 2020. The EIA expects oil production in the Permian region of the United States to rise to an all-time high in April.
On the whole, the supply side is trying to fill the shortage of supply caused by the sanctions on Russian crude oil. If we fully mobilize the production potential of all parties, we can theoretically fill the supply gap caused by the reduction of Russian exports, but obviously it takes time. At present, the supply of crude oil market is still tight.
In terms of crude oil demand, obvious changes have also taken place recently. The high oil price in the early stage has begun to trigger negative feedback on demand. Some experts have begun to warn that the damage to crude oil demand will be gradually reflected as the oil price rises to $125 / barrel. This concern will be alleviated as the oil price falls from a high level. However, the impact of the conflict between Russia and Ukraine is still fermenting. While western countries increase sanctions against Russia, they also begin to have a significant impact on the global economy. US President Biden has repeatedly stressed that sanctions will destroy the Russian economy. Although Putin said that sanctions will only make Russia stronger, the huge impact of sanctions is still very obvious. It is basically certain that the Russian economy will decline in 2022. The sanctions did not only hurt the Russian economy, but also had a great impact on Europe, where Russia has close economic and trade ties. The soaring energy and commodity prices have paid a high cost for global maintenance, brought huge inflationary pressure and hit the process of global economic recovery. According to the judgment of the OECD, the conflict between Russia and Ukraine may reduce the global economic growth by 1 percentage point. The damaged economic outlook forced major institutions to reduce the growth expectation of crude oil demand in 2022. The most representative is that IEA lowered the world oil demand forecast from the second quarter to the fourth quarter of 2022 by 1.3 million barrels / day, and lowered the global oil demand growth forecast in 2022 by 950000 barrels / day to 2.1 million barrels / day, with an average of 99.7 million barrels / day. In addition, Goldman Sachs, which has been singing about oil prices, lowered its Brent crude oil price forecast for the second quarter by $15 / barrel. It is expected that the average price of this global crude oil benchmark in the second quarter will be $120 / barrel, but it is expected to rebound to $135 / barrel in the second half of this year.
At the macro level, the United States and the United Kingdom announced interest rate hikes respectively this week. Faced with the highest inflation rate in 40 years, the Fed decided to raise interest rates by 25 basis points on Wednesday and hinted that it might raise interest rates at each of the remaining six meetings this year. At 20:00 Beijing time on March 17, the Bank of England announced an interest rate increase of 25 basis points to 0.75%, but one of the nine members did not support the interest rate increase. The attitude of the Federal Reserve and the Bank of England is basically the same. They should not only raise interest rates to fight inflation, but also reduce the negative impact on the economy as much as possible. Inflation must be dealt with in the short term, but overall consideration should be given to the medium and long term to maintain economic development as far as possible.
The performance of oil price in March gave us a vivid practical lesson. Under the influence of some unconventional events, investors’ psychological panic had a great impact on the price. With the escalation of worry, the fluctuation range of price will be greatly enlarged, and the behavior of overcorrection will appear after the mood cools down, so the oil price will form such a sharp contrast. Although it is still in the first quarter, the most important event of the year has been scheduled for the conflict between Russia and Ukraine. Great changes in the supply and demand pattern of the crude oil market and even the whole global energy market are already under way, and the attendant side effects such as high oil prices may have a far-reaching impact and accelerate the process of energy transformation. The pattern of high oil price oscillation has been formed. At present, there are many decisive factors for oil price. The core is the change in the supply of Russian crude oil affected by sanctions. At present, the supply of crude oil market is still tight, which means that oil price does not have the risk of continuous sharp decline. However, whether Iran, Venezuela and the United States and other oil producing countries can increase supply needs to be followed up and observed next, which will have a great impact on oil price. Generally speaking, under the background of tight supply in the near future and it is difficult to control high inflation for the time being, oil price still has its core logic of high operation, but the medium and long term still depends on the interpretation of the supply and demand situation of the whole market. (author: Haitong futures)
