Source: Zhongcai Futures Author: Zhongcai Futures
The text of the research report
Message side:Recession fears remain the biggest reason oil prices are trending lower as demand concerns remain stronger than supply concerns, with crude prices set for a third straight weekly decline this week despite several spikes.
There are a number of factors affecting oil prices, with the recent setback to the Iran nuclear deal, which seemed to be going well, appearing to be largely driving prices higher.
European diplomats have expressed “serious doubts” over whether Tehran is really looking to restart the 2015 nuclear deal, with Israeli Prime Minister Yair Lapid highlighting what he called “encouraging signs” that the Iran deal will not be restarted, suggesting Israel’s plans are Success.
Without a nuclear deal with Iran, Iranian crude cannot enter the market, raising concerns that supplies in the international oil market remain tight. And Asia’s coronavirus lockdowns are widening and prolonged, all of which have led to a sharp downward revision in Asia’s growth forecasts, as expectations of lower Asian demand weigh on oil prices, offsetting and alleviating such concerns.
But the dollar’s recent strength has weighed on oil prices, as the dollar-denominated commodity has risen relative to other currencies as the greenback strengthens in a dollar-dominated oil market, reducing buyers’ affordability.
The U.S. inflation data in August was higher than expected, and the prospect of aggressive interest rate hikes by the Federal Reserve has been strengthened again. The International Energy Agency (IEA) expects almost zero growth in oil demand in the fourth quarter. The Federal Reserve is even willing to weaken the US economic growth in order to combat high inflation.
The market is therefore jittery and oil fundamentals remain bearish. Data released overnight by the U.S. Energy Information Administration (September 14) showed that U.S. crude oil inventories unexpectedly rose sharply in the latest week, and distillate inventories also rose far more than expected, indicating weak fuel demand and restraining oil prices. The EIA also said U.S. refinery supply, which represents demand, was 19.7 million barrels per day (bpd) over the past four weeks, down 7 percent from a year earlier.
Summary of opinion:Demand will fall as the economy begins to slow and energy costs remain high. And fears of a recession remain the biggest reason behind the downward trend in oil prices this week. The World Bank warned on Thursday that the risk of a global recession has risen recently, noting that central banks have been raising interest rates.
The World Bank believes that if interest rates are raised too quickly, it will push the global economy into a slowdown. A recession hurts oil demand like it hurts almost everything else, which will help keep inflation in check, but at a very high cost. However, there are few options to choose from. To sum up, our conclusion is that oil prices are unlikely to pick up until the European embargo against Russia comes into effect.
Strategy Tip:Temporarily wait and see.
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