After the delay in the progress of the Iran nuclear deal and the OPEC+ monthly meeting emphasized the tightening of market supply and demand, global crude oil prices broke through sharply this week, rising by about 4%. Brent crude oil crossed the US$70/barrel and US$72/barrel marks in one fell swoop, and SC crude oil also once exceeded the 450 yuan/barrel mark. Judging from this week’s market, there is no large-scale resistance from the short sellers in the crude oil market, indicating that the market itself has believed that the current oil price does not have the basis for a sharp decline.
In a choppy state, it easily crossed two major resistance levels, and the highest point of Brent crude oil has exceeded the highest point in 2 years. But looking at the extended cycle, this time the price has returned to US$72/barrel. Is it not the fourth time in two years that it has hit the important mark of US$72/barrel?
We have analyzed the previous three times when the price reached this position many times. The first time was due to an attack on Saudi Arabia’s oil pipeline, which caused half of Saudi Arabia’s production capacity to withdraw from the market. The price soared directly from US$60.25/barrel to US$71.95/barrel that day, and then the market began a long correction process.
It also caused the price to rise sharply that day, but then the price also went out of a trend similar to the first time.
The third price surge is relatively close now. On March 8 this year, the surge at that time was due to the coordination of fundamentals and macro environment. Although the price subsequently fell, the magnitude and speed of this decline were much stronger than the previous two.
Now, the price has returned to this high point for the fourth time. Whether it can actually stand firm this time depends on the determination of the bulls.
In addition to demand-side variables this week, changes in the U.S. dollar index have also given the crude oil market a certain degree of uncertainty. After the US dollar index failed to break through the 90 mark in the first half of the week, it has been hovering and oscillating below the 90 point. As the United States continues to “release water” and the Federal Reserve becomes more tolerant of inflation expectations, some market analysts believe that the U.S. dollar index may enter a longer-term bear market. Although this is something the Federal Reserve does not want to see, the recovery of the U.S. economy is currently top priority, so it is not ruled out that the U.S. dollar index will provide some support to the crude oil market, and it will also push up global inflation expectations, thereby putting pressure on Passed again to the Fed.
However, in the second half of the week, the Federal Reserve began to remove junk bonds from its balance sheet, which was equivalent to tightening liquidity in the U.S. dollar market in disguise. As soon as the news came out , the U.S. dollar index rose sharply, commodities represented by copper fell in response, and gold prices also experienced their largest single-day decline in recent months. Although a spokesperson for the Federal Reserve stated in an interview with the media that this asset reduction plan has nothing to do with monetary policy and is not a signal about monetary policy (adjustment), it still gave the U.S. dollar index bulls greater confidence. However, the good times did not last long. Friday’s non-farm payrolls data once again put the dollar back in a weak position. Judging from the performance of crude oil prices, the sharp surge in the US dollar index only delayed the oil price from substantially breaking through the important mark of 72 US dollars per barrel, and did not cause too much panic in the crude oil market. Therefore, when the US dollar weakens again , oil prices successfully touched above $72/barrel.
The more important news in the domestic market is that the national level is still controlling the prices of bulk commodities to prevent excessive raw material costs from inhibiting economic development. This is the key to economic recovery. At this time, the country does not want inflation expectations to continue to rise in the future, thereby increasing the difficulty of economic recovery and the dilemma of economic policy. The United States is the best example now. The United States hopes to restore its economy and put a large amount of currency into the market. Biden continues to introduce its economic stimulus policies in order to keep the economy dynamic. However, the easing of the US dollar directly caused the cost of global raw materials to take off, and ultimately the prices of consumer goods also increased, causing the Federal Reserve to repeatedly raise the tolerance limit of inflation. However, such high inflation will bring the risk of stagflation to the United States, so we can also think that the Federal Reserve It seems to be walking on a cliff in order to balance all aspects. Therefore, in order to prevent this kind of situation from happening domestically, it is particularly important to control commodity prices and domestic inflation at this time.
We still need to continue to pay attention to the epidemic factors. Although the epidemic has withdrawn from the core logic circle of the crude oil market, once the situation changes, short sellers may still make a comeback. Judging from the current situation, the number of newly confirmed cases worldwide has declined rapidly. It has now dropped to around 460,000, a decrease of 360,000 from a month ago. The decline is considerable. Among them, the number of newly confirmed cases in the United States and India The number of people has also improved significantly. The number of new cases in the United States has dropped to about 15,000 people per day, and the number of new cases in India has also dropped to less than 150,000 people per day, and the downward trend is still continuing.
Judging from the vaccination situation, global vaccine popularization is still accelerating. Currently, the number of vaccinations in a single day has exceeded 33 million, of which China’s vaccination volume has exceeded 33 million. Nearly 20 million doses per day, ChinaIt is estimated that more than 700 million doses have been administered. Although vaccination is not 100% effective, it can block the spread of the virus to a large extent. Judging from the current situation in Guangzhou, some infected people only received the first shot and did not have time to receive the second shot. However, judging from the performance, as long as they are vaccinated, reinfection with the virus will only be mild and they will be cured quickly. Therefore, there will be no restrictions on economic development again.
The Brazilian town Serana, which has always been well-known, is also a very typical case. In February this year, Serana launched an unprecedented campaign. In just two months, almost all adults in the city who were eligible for vaccination were vaccinated with China’s Sinovac vaccine. On May 7, the Wall Street Journal described the current situation in the small town in detail: Compared with the peak of the epidemic in March, Serana’s infection rate dropped by 75%, and among those who had received two doses of the vaccine, there were no cases of COVID-19-related illnesses. of deaths, life is slowly returning to normal.
The main logic of this week’s price rise lies in the market Seeing the potential benefits of future demand, based on historical experience and seasonality, crude oil prices usually perform relatively well in the summer, especially at the critical moment of current demand recovery. The main reasons are as follows.
First, according to seasonality, summer is usually the peak season for demand for crude oil and refined oil products. The arrival of the global driving season and demand for air conditioners will increase the demand for finished products. At the same time, the industry is fully recovering in the summer, which is often a time when refinery profits are better. Therefore, refineries also have a relatively strong willingness to increase production. This trend can be clearly seen from the refinery operating rate. Usually starting in April every year, the U.S. refinery operating rate will steadily increase, reaching the peak operating rate in September, which is the peak of crude oil demand. Therefore, demand Strength also determines the fundamentals of crude oil.
Second, after entering summer, there is usually a decline cycle in inventory. This can also be seen from the crude oil inventory and refined oil inventory in the United States. After entering the summer, the crude oil inventory in the United States tends to continue to be digested. From a time point of view, it is already close to the turning point of inventory. It is expected that the future crude oil inventory in the United States will enter a continued downward trend. It can also be seen from the U.S. refined oil inventory that refined product inventories are also in a downward cycle.
However, even with the arrival of the driving season, there is still some doubt whether the demand for U.S. refined oil products this year will be better than in previous years. Judging from the current situation, this year The demand for gasoline and diesel is average, with gasoline performance near the same period in previous years and diesel demand at its lowest point in the past five years. Judging from the cumulative year-on-year growth indicators of demand, gasoline is still below zero, and diesel remains near zero. Judging from the current demand growth, the market’s hyped demand recovery is only at the expected level and has not been fully confirmed.
In addition, the current market uncertainty There has been an increase, and variables in the U.S. dollar index may also become the key to affecting oil prices. While the Fed is selling junk bonds, the U.S. dollar is showing a huge bullish signal, with both copper and gold showing sharp declines. The U.S. dollar index has been hovering around 90 for a long time now. If the Fed does not take care of it, it is likely that it will fall below this range. But we can also see that as long as the Federal Reserve takes bullish actions, the U.S. dollar index will have a relatively good rebound. Therefore, in the current market, in addition to paying attention to fundamentals, we also need to pay attention to the specific trend of the US dollar index.
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