On December 5, international crude oil futures fell significantly. The settlement price of the main contract of US WTI crude oil futures was 76.93 US dollars/barrel, down 3.05 US dollars or 3.8%. The settlement price of the main contract of Brent crude oil futures was 82.68 dollars/barrel, down 2.89 dollars or 3.4%.
The sharp drop in oil prices is mainly disturbed by the macro negative
The unexpected growth of the US ISM non manufacturing index in November, released on Monday, reflects that the domestic economy is still resilient. The continued economic boom has triggered market concerns about the Federal Reserve’s transition from “dove” to “eagle”, which may disappoint the Federal Reserve’s previous desire to slow down interest rate hikes. The market provides the basis for the Federal Reserve to curb inflation and maintain the monetary tightening path. This triggered a general decline in risky assets. The three major US stock indexes all closed sharply, while the Dow fell nearly 500 points. International crude oil fell by more than 3%.
Where will the oil price go in the future?
OPEC played a positive role in stabilizing the supply side
On December 4, the Organization of Petroleum Exporting Countries and its allies (OPEC+) held the 34th ministerial meeting online. The meeting decided to maintain the production reduction target set at the last ministerial meeting (October 5), that is, to reduce production by 2 million barrels per day. The scale of production reduction is equivalent to 2% of the global average daily oil demand. This decision is in line with market expectations and also stabilizes the basic market of the oil market. Because the market expectation is relatively weak, if the OPEC+policy is loose, the oil market will probably collapse.
The impact of the EU’s oil ban on Russia needs further observation
On December 5, the EU’s sanctions on Russian seaborne oil exports came into force, and the upper limit of the “price limit order” was set at $60. At the same time, Russian Deputy Prime Minister Novak said that Russia will not export oil and petroleum products to countries that impose price limits on Russia, and disclosed that Russia is developing countermeasures, which means that Russia may have the risk of reducing production.
From the market reaction, this decision may bring short-term bad news, which needs further observation in the long term. In fact, the current trading price of Russian Ural crude oil is close to this level, and even some ports are lower than this level. From this point of view, the short-term supply expectation has little change and is short of the oil market. However, considering that the sanctions involve insurance, transportation and other services in Europe, Russia’s exports may face greater risks in the medium and long term due to the shortage of tanker capacity supply. In addition, if the oil price is on the rising channel in the future, the Russian counter-measures may lead to the contraction of the supply expectation, and there is a risk that the crude oil will rise far away.
To sum up, the current international oil market is still in the process of supply and demand game. It can be said that there is “resistance on the top” and “support on the bottom”. In particular, the supply side is disturbed by the OPEC+policy of adjustment at any time, as well as the chain reaction caused by European and American oil export sanctions against Russia, and the supply risk and variables are increasing. Demand is still concentrated in the expectation of economic recession, which is still the main factor to depress oil prices. The business agency believes that it will remain volatile in the short term.
Post time: Dec-06-2022