Significant economic pressure, oil prices continue to decline

(1) Trend review: The Brent11 contract closed at $86.7 per barrel, down 5.4% for the week. The SC11 contract was 651 yuan per barrel, down 1.9% for the week.

免費開通賬戶> > 入金最高送 $88

(2) Short-term concerns: International oil prices fell below $90/barrel again last week. This is despite fears of an expansion of the conflict resulting from the partial mobilization of Russia. From the perspective of geo-sentiment, the oil price has been boosted: However, the significant combined effect of the financial pressure caused by the successive interest rate hikes by overseas central banks and the continued economic slowdown in the United States and Europe has caused oil prices to continue their downward trend.

• Financial pressure continues to increase.

① The Federal Reserve raised interest rates by 75 basis points for the third consecutive month. Powell said that economic weakness is the necessary price to curb inflation.

②In September, the leading composite PMI of the United States and Europe fell below the line of prosperity and decline for the third consecutive month

③ US stocks fell sharply and US bonds rose, and the US dollar index hit a record high. It is unfavorable for oil prices from the perspective of economics, finance and risk appetite.

• There are many uncertainties in the geopolitical situation.

① Four places in Ukraine were put into Russia, and Russia was partially mobilized. The situation in the later stage is still unclear, and the escalation or easing of the conflict will have different impacts on oil prices.

② In the face of economic pressure, the EU has eased sanctions on Russia's coal exports and accelerated discussions on Russia's oil price cap. If the price cap plan is passed, it will overturn the sanctions plan that was originally scheduled to be implemented in December. The logic of oil prices will also be revised accordingly.

③ With the recent drop in oil prices, some OPEC countries once again released comments on production cuts. Whether or not to reduce production and the extent of the reduction will also have different effects on oil prices.

• Under the benchmark scenario, oil prices remain under pressure in the fourth quarter.

In the first half of the year, geopolitical upward support dominated, and in the second half of the year, financial pressure became more and more significant. After the short-term recession caused by the epidemic in the second quarter of 2020, the current recovery cycle is coming to an end, signs of overseas recession are beginning to appear, and systemic risks are gradually heating up. In the benchmark scenario of mild recession, oil prices may maintain a relatively slow center of gravity retreat.

(3) Oil price outlook:

• Short term. The oil price fluctuated from $90-95, and gradually moved down to $85-90 per barrel. With current inventory levels, there is strong valuation support at $80. There is still room to fall back on this.

• the mid-term. Oil prices remained under pressure in the fourth quarter. In the first half of the year, geopolitical upward support dominated, and in the second half of the year, financial pressure became more and more significant. After the short-term recession caused by the epidemic in the second quarter of 2020, the current recovery cycle is coming to an end, signs of overseas recession are beginning to appear, and systemic risks are gradually heating up. In the mild recession benchmark scenario, oil prices may maintain a relatively slow center of gravity retreat.

• Risk situation. ①Upside risks: Russia’s geopolitical conflict expands, OPEC’s large-scale production cuts, and European supply disruptions are substantial. ② Downside risks: global economic or financial crisis, the lifting of EU sanctions on Russia, the conclusion of the Iran nuclear deal, etc.