The crude oil market will ignite a light of hope for you when you are helpless, and will also extinguish it with a basin of water when you are most looking forward to it. Last week’s crude oil market gave us a taste of what it means to be disappointed after hope. Crude oil prices rose linearly last Tuesday under the dual stimulus of the successful development of a vaccine in the United States and the European Recovery Fund, and successfully broke through the oscillation platform and climbed upward.
The good times did not last long, and the strong pattern did not last long. After the emotional stimulation, the market entered again In the oscillation market with extremely low volatility, the price followed the US stock market and staggered into the previous oscillation range again. As of last Friday’s close, Brent prices had increased by 0.74%; WTI prices had increased by 1.4%.
In the current crude oil market, strong logic that can trigger large fluctuations and market trends has been reflected in prices, including the benefits of OPEC+ production cuts, the significant progress in vaccines, and the Flood irrigation policy to stimulate the economy. At present, these news are unlikely to push oil prices further upward. In fact, the reason is very simple. The epidemic is still so severe and the economic recovery has not reached the desired level. Under such circumstances, the United States is still “blaming China” for the source of the epidemic and suppressing China to win over voters. , completely ignoring the outbreak of the epidemic in the United States.
In the absence of this main logic, crude oil has begun to follow the trend of U.S. stocks. The recent rise and fall are basically in sync with the U.S. stocks. It can also be understood as an industry purely engaged in crude oil. Or speculative investors have partially left the market. In the current market, more macro funds are allocating assets, which has led to the financial market being more in the allocation stage rather than the stage of starting the market.
At present, there is still no major main line logic for future market variables. With trading volume and positions continuing to shrink, it is difficult for funds to find opportunities to fully participate. Therefore, In the short term, we seem to have to continue to wait for a possible tipping point in the market. This tipping point may be another huge good news about the vaccine, or it may be a further escalation of friction between China and the United States. In short, until the market becomes clear, , it is recommended to operate with caution.
Variables appear in the US market
Up In the EIA data released last week, a long-lost variable appeared. U.S. crude oil production actually increased by 100,000 barrels per day. If calculated according to cost theory, the current price position is just near the cost line, and shale oil producers will not make much profit. Recently, we have frequently seen news of bankruptcies of upstream and downstream companies in the U.S. shale oil industry, which illustrates the problem.
We speculate that the growth of crude oil production in this period may be due to two factors: First, some low-cost oil fields have been put into use, and oil prices have been able to rise at the current position. Allowing them to generate meager profits; second, some shale oil companies on the verge of bankruptcy are facing cash flow pressure and have to invest in some inventory wells to maintain cash flow. If it is the first case, you don’t have to worry too much. Under the current oil price, shale oil does not have enough motivation to significantly increase production. Even if it increases production, the extent will be relatively limited; if it is the second case, It is necessary to observe the durability of the increase in production.
In any case, the current decline in U.S. crude oil is an obvious variable, which is enough to affect global supply. During the period of low oil prices, OPEC+ was more efficient in cutting production. An important factor is that the prisoner’s dilemma problem does not exist on a global scale. While OPEC+ is significantly reducing production, it will not worry about seizing the market due to increased production by certain countries. If U.S. production continues to increase, it will intensify the prisoner’s dilemma and be detrimental to the good implementation of the production reduction agreement.
In addition, there was a slight decline in U.S. refining input and operating rates. U.S. crude oil inventories increased by nearly 5 million barrels, gasoline inventories fell by 1.8 million barrels, and refined oil inventories increased. 1 million barrels. These signs indicate that the demand in the US market is not as good as imagined. Coupled with the seriousness of the epidemic in the United States, with 69,000 new confirmed cases last Friday, and the cumulative number of confirmed cases exceeding 4.1 million, it can be said that a full recovery of the U.S. economy is far away, and macro concerns in this case will restrict the The pace of rising oil prices.
In addition to the United States, the epidemic situation in Brazil and India is not optimistic. These three countries are the only countries in the world with more than 1 million confirmed cases. Among countries where the number of new confirmed cases remains above 45,000, Brazil hit a new high of 62,000 last week, and India set new highs in succession.
Treat Chinese market demand with caution
At present, only the Chinese market can play the role of engine. In the second quarter, China’s GDP grew by 3.2%, and economic growth began to turn from negative to positive. Compared withIt is said that other countries are still in the quagmire of negative growth, so the demand side of crude oil still needs to keep a close eye on China. But the current problem is that when the epidemic is so serious, international trade has been severely affected. Even if China stands out, it will not be able to fully stimulate the growth of the global economy. Moreover, with exports facing shrinkage, China The economy is bound to be greatly affected, so the logic once again returns to the issue of controlling the global epidemic.
At the same time, the international environment is not favorable to us. The game between China and the United States is still going on, and the confrontation between the two countries shows no signs of easing. China is already preparing to start the internal circulation process. The international environment is not optimistic, and the international economic environment is even worse.
We are not bearish on the Chinese market, but after the excessive purchases in the first half of the year, it is questionable how much purchasing space there is in the future. Judging from China’s crude oil import volume, China’s import volume exploded in May and June. The corresponding period was just after the price plummeted. China took advantage of low oil prices to purchase a large amount of low-priced goods. This was also the sudden explosion of imports in May and June. s reason. But in fact, we know in our hearts that the big outbreak in May and June will consume future market demand in advance.
The third batch of crude oil non-state trade import allowances was issued in 2020, totaling 26.84 million tons, an increase of 108% from the third batch in 2019. This third batch issuance is a supplement to the first two batches. After adding up the quotas, the crude oil non-state trade import quota in 2020 totals 184.55 million tons, an increase of 11.17% from the total quota in 2019.
In addition to hoarding oil at low oil prices, China’s crude oil demand is indeed growing by leaps and bounds. Both independent refineries and main refineries are operating at full capacity for processing, and refinery operating rates are All have reached new highs in recent years. Such a high operating rate has a lot to do with China’s economic recovery, and it is also related to the high refining profits some time ago. But recently we have seen that due to repeated heavy rains in the south, diesel refining profits have dropped to a new low in the past three years. Gasoline profits have begun to rebound from lows, and the seasonal recovery has been obvious.
According to our understanding, most of the crude oil import quotas of independent refineries in the first half of the year have been used up. Although an additional 2,684 tons were added in the third quarter, compared with the procurement scale in the first half of the year It is far from enough, so quotas will become a major factor restricting local refinery procurement in the future. In addition, the decline in refining profits will also restrict the enthusiasm of refineries to start operations. Therefore, it is foreseeable that China’s crude oil processing volume and purchasing volume will be at risk of slowing down in the second half of the year.
From a fundamental perspective, we are currently bullish on crude oil The longer the favorable period for exerting force is delayed, the more unfavorable the fundamentals will be for the bulls. When the epidemic is not under control, we do not expect how quickly the demand will recover. On the contrary, we are beginning to worry about the global demand for crude oil. . After China’s crude oil spot is overbought, it may enter a period of slowing demand in the future. At the same time, the epidemic situation in the United States, India, Brazil and other countries is still developing. In this case, even if liquidity is released significantly, the market will not be so Strong undertaking capacity has led to idling of financial assets and has not fully flowed to real enterprises.
Currently, crude oil prices are still in a oscillating market, and there is no obvious long-short logic in the market. The relative caution of funds has caused the volatility of oil prices to decline. The only thing we can do now seems to be to wait, waiting for the market to show obvious long-short logic or an obvious breakthrough before entering the market to do long. </p
