Oil price breaks down

(1) Price performance: Brent2301 closed at US$87.7/barrel, -8.4% for the week.

(2) Short-term analysis:

After falling slightly by 3.82% last week, U.S. crude oil fell for the second consecutive week, extending the decline to around 8.50%. Brent oil fell by about 7.7%. The increase in the number of epidemic cases in Asian countries has worsened demand concerns, leading to a downward trend in oil market sentiment and becoming a decisive factor in the decline in oil prices this week. The hawkish remarks of Fed officials suppressed expectations of a slowdown in the pace of aggressive interest rate hikes, which is good for the dollar and negative for dollar-denominated commodities.

1. The monthly difference structure of crude oil futures has weakened. The monthly spread of crude oil futures reflects the relative strength of the fundamentals of recent months and far months due to the systematic influence of hedging geopolitical attributes and financial attributes. When the price curve is in the structure of contango in recent months, it usually means that the spot market is weak; backwardation in recent months usually means that the spot market is strong. On Friday, the WTI next-to-month spread turned negative for the first time since last year. In addition to the disk trading factors that will usher in the last trading day of the 2212 front-month contract this Monday; the global crude oil spot market is indeed weak in the short term, mainly due to supply support and demand pressure.

2. China's demand boost expectations fell through. Since late October, the epidemic situation in China has escalated again, especially in the last two weeks, the number of new confirmed and asymptomatic infections in a single day has tripled from 8,000 to 25,000, the highest since April this year. Previously, the release of the 20 Measures for Epidemic Prevention once aroused market optimism about the accelerated recovery of demand in China, but the grim reality puts the pressure on prevention and control still high, and transportation demand remains weak. The sluggish purchasing willingness of Chinese buyers is one of the important reasons for the recent weakening of the crude oil spot market.

3. OPEC cut exports to cash. In November, OPEC's tentative two-month production cuts began to be implemented. Although the policy level actually needs to reduce the dry quota, OPEC's strong willingness to raise prices has caused the export decline shown in the shipping data in the first half of the month to exceed 1 million barrels per day. It is necessary to focus on whether the recent drop in oil prices will lead to a further extension of OPEC's production cuts in December.

(3) Oil price outlook:

The supply-side support of OPEC's sharp reduction in exports cannot withstand the pressure on the demand side caused by the sudden severity of the epidemic in China: oil prices fell short-term and entered the range of 85-90 US dollars / barrel again.

On the whole, there are still supporting factors for winter oil prices: from the perspective of supply and demand, winter crude oil may enter the seasonal destocking stage; from a financial perspective, the pace of US inflation and interest rate hikes is expected to slow down, and the recent recovery of US stocks and the return of US oil have brought financial pressure on oil prices. Easing; from a geopolitical perspective, if the EU sanctions are implemented as scheduled, there will still be a certain sentiment boost.

Near-term variables focus on the actual implementation of EU sanctions. The EU may announce a ceiling price for Russian oil exports on Wednesday. If the price is close to $80/barrel and Russian crude oil exports can be maintained smoothly, the oil price range may move down to $80-90/barrel, and there is still room below: If the target If the price is too low and Russia cuts production to deal with it, the oil price is supported and may rise at the current price. At present, no unilateral trend downward resonance effect has been formed, and attention should be paid to the effectiveness of geo-variable support.

(4) Risk warning:

Upside risks: OPEC extends or expands the scale of production cuts, Russia's geopolitical conflicts expand, etc.

Downside risks: global economic crisis, Iran nuclear agreement and other spot gold immediate operation suggestions