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The supply side is suddenly positive, and the oil market may change?

2022-12-09
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Keystone, an important oil pipeline between the United States and Canada, was shut down due to oil spills. G7’s price limit to Russia blocked tankers in the Bosporus Strait of Turkey. WTI crude oil quickly rose to 75.41 before the US market, and then fell sharply, approaching the $71 mark , completely erasing the more than 4% gain after the closure of the Keystone oil pipeline, and finally closed down 0.85% at $71.78/barrel; Brent crude oil closed down 1.19% at $76.44/barrel. SC crude oil fell below the 500 yuan/barrel mark for the first time in the past year.

Two major bursts on the supply side

On Thursday (December 8), Keystone, the main oil pipeline in the Gulf of Mexico between Canada and the United States, was shut down due to a crude oil spill. In view of the leaked crude oil flowing into the waterway, the market expects that the pipeline may be shut down for several days, which affects about 600,000 barrels per barrel. daily delivery.

In addition, the G7 price limit on Russian oil blocked tankers near the Bosphorus in Turkey, blocking about 18 million barrels of oil. The shortage of oil supply triggered a sharp rebound of more than 4% in WTI crude oil to an intraday high of $75.44. However, with the bears fully taking the initiative, oil prices finally gave up all the gains during the day and closed down 0.84%, continuing to hit a new low of $71.12 for the year, just one step away from the $70.0 mark.

Oil prices have become more volatile due to the decline in liquidity, but the overall downward trend is still obvious. A series of lower lows and lower highs are suggesting that the $70.0 mark is in danger. Investors need to be alert to the possibility of short-term panic selling triggered by breaking positions .

Market outlook focus: Russia's potential production cut retaliation

On Thursday (December 8), according to the British Financial Times, although the Kremlin is skeptical about the effectiveness of Western sanctions. But analysts at the Russian central bank's research and forecasting unit warned in a note this week that a $60-a-barrel price cap for Russian oil and the EU's ban on the country's crude could "significantly reduce" Russian oil production in the coming months. economic activities.

Russian officials said on Thursday (December 8) that Western countries' imposition of price caps on Russia's seaborne oil exports will disrupt the global supply chain, reaffirming that they will not supply oil to countries that support price caps on Russia, and that Russia is preparing to retaliate Sexual measures.

And just this Tuesday (December 6), Russian Deputy Prime Minister Novak said that Russia may reduce oil production, but not too much. At the same time, Russia is considering setting a price floor for its oil exports to international markets or stipulating the maximum salable discount for Russian oil relative to international benchmark oil prices, in response to the G7 price ceiling.

There is no doubt that the market does not sell Russia's "price floor", because the European and American oil embargoes against Russia will promote the flow of Russian crude oil to Asia, and the price of Ural crude oil in the Baltic Primorsk port last week was below $50, which means Russia will not take measures to significantly reduce production, and the cost of Russian crude oil production is much lower than that of OPEC members (OPEC announced at the end of last week that the scale of production will remain unchanged), which means that Russia's "retaliatory measures" may be more about setting the bottom line for oil prices.

Therefore, we can see that the current downward trend in the crude oil market continues due to factors such as the increase in U.S. shale oil production and the global economic recession, but the shortage of supply leads to a gradual increase in the bottom. Taking WTI crude oil as an example, its bottom line price may be around the range of 60.0-65.0 US dollars. What investors need to be wary of is the risk of a sharp drop in oil prices in the short term due to reduced liquidity.


Outlook

The daily chart shows that oil prices continued to run in a downward channel, and the decline accelerated after breaking through the strong support of $76. However, compared with the decline in the previous three days, yesterday's decline slowed down significantly, and the intraday rebound was the largest this week. Short-term bull resistance, short-term does not rule out oversold rebound recovery, but it is still difficult to change the downward trend. The current pressure has moved down to 73.50 US dollars, and it will remain bearish below this level within the day. The 70 mark below will focus on it. If it further breaks the decline, it may increase its strength.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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