Oil price shock pattern strengthens

(1) Price performance: US crude oil fell by about 0.78% this week, down 8.08% from last week, and the decline has narrowed. Brent oil also fell around 0.69%, after falling 7.10% last week. The market expects that the epidemic control measures in Asia will be gradually relaxed, which has changed the pessimism about the economic recession last week and renewed optimism, which supports international oil prices. Investors reassessed the impact of sharp interest rate hikes by global central banks on energy consumption.

(2) Short-term analysis: Yesterday, oil prices rose first and then closed flat. On the one hand, the new measures announced by Biden in the United States further strengthened the bottom support for oil prices. On the other hand, the re-emergence of the epidemic in many places in China has caused transportation demand to fall again; the expectation of boosting demand from the issuance of export quotas in the fourth quarter has not materialized yet, which has become a potential source of pressure on oil prices.

Biden's New Deal strengthened the pattern of wide fluctuations in oil prices.

1. Extend the release time of strategic reserve inventory to December, and non-additional increments will have limited impact on short-term oil prices. However, it is not ruled out that additional inventory will continue to be placed in the future, which will limit the upward space for oil prices in the medium term.
2. Determined the inventory repurchase price range of 67-72 US dollars / barrel. It will provide strong bottom support when oil prices fall to this range in the future.
3. It is meaningless to call on oil companies to consciously make profits. Since last week Biden had predicted that new measures will be announced this week, the market has a certain lead in expectations. Crude oil prices fell short-term before the specific plan was announced on Tuesday, but rebounded slightly after the official announcement on Wednesday, possibly due to an assessment of the lack of substance of the new measures. The above three measures have little impact on short-term oil price sentiment and supply and demand, but need to pay attention to the possibility of more measures in the future and the additional impact on oil prices at that time.

Expectations of a boost in Chinese demand have yet to materialize. Before the National Day, China issued an additional 15 million barrels of refined oil export quotas, triggering market expectations for China's refinery opening and crude oil demand boost in the fourth quarter. From the feedback from traders so far, the refinery's willingness to purchase crude oil is limited, and the spot price performance is relatively sluggish. This may be partly due to the dampening effect of the recent outbreak of the epidemic on domestic demand and expectations for gasoline and diesel. In the first week of October, China's air export traffic fell by 42% year-on-year, and road traffic fell by 30% year-on-year; road traffic did not continue to recover in the following two weeks. If the impact of the winter epidemic on demand is maintained, it may lead to another downward revision of Chinese and global demand expectations, putting downward pressure on the supply and demand valuation of oil prices.

(3) Oil price outlook: Geographical support and macro pressure balance each other. In the absence of additional emergencies, it may be difficult to form a sustained unilateral trend, temporarily maintaining the central expectation of a wide range of 90-100 US dollars. The direction of breakthrough depends on the breaking rhythm of unsteady equilibrium factors, and pays attention to the progress of geopolitical events.

(4) Risk warning: Upside risks: OPEC continues to extend production cuts, Russia’s geopolitical conflict expands, etc. Downside risks: global economic crisis, Iran nuclear deal, etc.