Author: Wu Mengwen
Futures Daily
Big countries play games, small countries play chess. Recently, some US media claimed that Russia will “invade” Ukraine on February 16. The Russian side responded that the U.S. continued to “come through fire” on the Ukraine issue and had “extremely hysterical”.
Yesterday, the video of the partial withdrawal of Russian troops from Ukraine exploded on the Internet, and the global stock market rose collectively.gold price, oil prices plummeted. As of the close this morning, the three major U.S. stock indexes closed up collectively, with the Dow up 1.22%, the S&P 500 up 1.58%, and the Nasdaq up 2.53%. WTI MarchcrudeFutures closed down $3.39, or 3.55%, at $92.07 a barrel. Brent crude oil futures for April ended down $3.20, or 3.31%, at $93.28 a barrel. Gold futures for April delivery on COMEX closed down 0.7% at $1,856.20 an ounce.
Still, the market seems to be panicking. The latest reading on the CNN Fear and Greed Index was 37. Analysts believe that the CNN fear and greed index is in a state of fear, indicating that the market is still in a state of panic, which is equivalent to the high VIX panic index, which is not conducive to risk assets and is good for safe-haven assets.
The decline in API inventories was less than expected. In the week ended February 11, US API crude oil inventories fell by 1.076 million barrels, compared with a decrease of 2.025 million barrels from the previous value. U.S. API Cushing crude oil inventories fell by 2.382 million barrels, the previous value decreased by 2.502 million barrels. US API gasoline inventories fell by 923,000 barrels, the previous value decreased by 1.138 million barrels. U.S. API distillate inventories fell by 546,000 barrels, compared with a decrease of 2.203 million barrels from the previous value.
Putin: A decision has been made to partially withdraw troops from the Ukrainian border, Biden: No confirmation of Russian withdrawal
According to CCTV news reports, at 15:00 local time on February 15, many military websites and banks, including the Ukrainian Ministry of Defense, Armed Forces and other websites, were shut down by a large-scale cyber attack. No one has yet claimed responsibility for the incident. Ukraine’s security services said the attack was very powerful and was a distributed denial of service (DDoS). At present, Ukraine’s national security services and cyber police forces are investigating. On January 14 this year, several government websites including the Ministry of Foreign Affairs, Ministry of Education, Ministry of Internal Affairs, and Ministry of Energy of Ukraine were shut down by a large-scale cyber attack.
On February 15, the Interfax news agency released a video of the Russian military showing a full load of military vehicles returning to the base, which triggered expectations that the war with Ukraine would ease again. A spokesman for the Russian Defense Ministry said troops from the western and southern military districts began returning to bases from the exercise by rail and road, but a series of combat training activities, including the exercise, were proceeding as planned. With the completion of combat training activities, troops will continue to move toward permanent deployment points in a flexible manner.
According to a report by Sky News on February 15, Russian President Vladimir Putin said a decision had been made to withdraw some troops from the Ukrainian border.
On February 15, local time, Russian President Vladimir Putin and German Chancellor Scholz met with reporters after more than three hours of talks in Moscow.
When answering a reporter’s question about European security and whether to go to war, Putin said that Russia does not want war, which is why Russia has put forward relevant proposals on European security. The U.S. and NATO’s responses to Russia’s security recommendations were neither specific nor constructive. The Russian side is willing to discuss some security issues with the United States and NATO, including the INF Treaty and military transparency, but only on the premise of conducting a comprehensive discussion on major issues involving Russia’s core concerns. In addition, Putin pointed out that Russia will also decide follow-up actions according to the development of the situation, but how the situation develops depends not only on Russia.
In response to the issue of NATO’s eastward expansion, Putin emphasized that for 30 years, Russia has been told that “NATO will not expand an inch to the east”, and now NATO’s military infrastructure is on Russia’s doorstep. Postponing Ukraine’s entry into NATO will not bring any change to the situation. Russia now wants to resolve this issue through negotiations and other peaceful means as soon as possible. The Russian side believes that the military deterrence of other countries against Russia is a direct threat to Russia’s national security. The United States and NATO arbitrarily interpret the principles of equality and indivisible security from the perspective of their own interests. Russia cannot turn a blind eye to this.
However, according to the British “Guardian”, on February 15, local time, US President Biden warned in his latest speech on the situation in Russia and Ukraine that a Russian invasion “is still very likely”, but a diplomatic solution is still possible. .
Biden warned that despite reports from Russia that some of its troops are returning to base, U.S. analysis has not confirmed this and that Russian troops remain in a threat position.
Biden repeated his call for Americans in Ukraine to leave immediately.
Biden said the U.S. has been engaging in “unbroken diplomacy” to prevent a Russian aggression, saying diplomacy “should be given every chance to succeed.”
The White House said sanctions could be considered even if Russia did not “invade” Ukraine.
The situation suddenly changed, precious metals dived at a high level
The sudden change in the situation in Russia and Ukraine caused huge fluctuations in the global market. Safe-haven assets such as crude oil, gold and government bonds fell across the board, with international oil prices falling by more than 4% at one point. The yield on the 10-year U.S. Treasury note surged above 2% again.
“The advance of the gold price in the early stage was driven by several factors. First, the risk aversion caused by the escalating geopolitical situation in Russia and Ukraine led to the rise of gold and the US dollar. In particular, the views on raising interest rates by 25BP are relatively consistent, and market prices have fully reflected the expectations of interest rate hikes. If interest rates are raised by 50BP, there may be some disturbance to the price of gold. Third, the global ETF holdings have shown a net inflow recently, which may be the gradual increase in investment confidence in gold. It is one of the signals of recovery.” said Li Mingyu, director of macro-finance R&D at Xinhu Futures Research Institute.
On the afternoon of February 15, it was reported that some Russian troops on the Ukrainian border would withdraw, and London gold fell by $20 from $1,880 an ounce to around $1,860 an ounce. In this regard, Shi Jialiang, a macro analyst of Founder’s mid-term futures, said that this reflects the safe-haven attribute of gold. When the geographical tension eases, the safe-haven demand for gold weakens, so the price of gold also weakens. Of course, if Russia-Ukraine relations deteriorate further, risk aversion will help gold continue to rise.
Shi Jialiang explained that the so-called “Gold in troubled times” is a direct manifestation of the safe-haven property of gold. “Bonds are the most common safe-haven asset, and the nominal interest rate is the price of the bond. Gold, as a zero-coupon bond, has the properties of a super-sovereign bond. Under the condition that inflation expectations remain unchanged, the price of gold fluctuates in the opposite direction with the nominal interest rate, which is consistent with the Bond prices fluctuate in the same direction, which is the embodiment of gold’s hedging properties. On the one hand, it is super-sovereign bonds, and on the other hand, it is super-sovereign currency. Gold has a strong risk-averse attribute. Therefore, in the context of the rising risk-averse sentiment in the current market , the price of gold continues to rise,” he said.
“Looking back at the impact of previous local conflicts on the price of gold, the conflict tends to be too much for the price of gold. Especially before the conflict, the fear of market wars has risen rapidly, and the risk appetite has deteriorated rapidly, which is conducive to the rise of gold prices.” Gong Ming, precious metals analyst at Jinrui Futures Said that if Russia-Ukraine relations deteriorate further, the price of gold will continue to rise. However, the latest news seems to have eased the relationship between China, Russia and Ukraine, so the price of gold fell by more than 1% in a short time. If the conflict between Russia and Ukraine is completely eased, precious metals will return to the game of high inflation expectations and policy tightening rhythm, revising previous expectations and falling slightly. In addition, the previously strong U.S. bond yields may return to the focus of the market and become an important suppression of precious metals.
In addition, Shi Jialiang said that other factors such as U.S. inflation data, Fed monetary policy adjustment expectations and progress, European Central Bank policy trends, U.S. dollar index and U.S. bond yield trends will all affect the price of gold.
At present, the inflation level in the United States is at a historically high level. In this regard, Shi Jialiang believes that gold, which is a commodity equivalent, has commodity attributes, which in turn derives anti-inflation attributes. Under the condition that other conditions remain unchanged, rising inflation will have a positive impact on gold prices in the short term, and falling inflation will have a negative impact on gold prices in the short term. “From the historical trend, from the 1970s to the 1980s, inflation and gold trended in the same way, rising and falling at the same time, and the impact of inflation on gold was relatively obvious. From 1985 to around 2000, the level of inflation and the price of gold Both are in a relatively stable period, and the relationship between the two is no longer obvious. The gold bull market after 2000 corresponds to a low level of inflation. The relationship between inflation and gold prices has weakened significantly, and the two have not shown consistency. Looking at the overall historical trend, the correlation between inflation and gold prices is weakening. Of course, in the short term, the unexpected performance of inflation will still have an impact on gold, but the impact is relatively limited.” He said.
In Gong Ming’s view, the impact of inflation on precious metals is relatively comprehensive. In a typical inflation transaction, such as the European energy crisis in August last year, the market was worried about the risk of stagflation, and precious metals performed better. But in fact high inflation will accelerate the pace of policy tightening. However, judging from the results announced by the CPI in January, the market is more inclined to interpret the impact of higher-than-expected inflation as an accelerated tightening of policies, which may lead to pressure on precious metals. At present, the factors affecting US inflation are the supply and demand gap, and the labor shortage is difficult to solve in the short term. The duration of US inflation may exceed expectations. The Federal Reserve may have the need to strengthen expected management. Before and after, precious metals may be under pressure for a short time.
“Currently, the market is fully expecting the Fed to raise interest rates in March, and inflation continues to rise. From the perspective of US nominal interest rate = inflation level + real interest rate, the real interest rate is facing compression, so the opportunity cost of gold will fall, which will support the strength of gold prices. In the later period, we will focus on the rate of interest rate hike by the Federal Reserve in March. If the interest rate is only raised by 25BP, the price of gold may strengthen due to the impact of the negative realization. If the interest rate is raised by 50BP at a time, there may be some adjustment pressure on the price of gold.” Li Mingyu said.
The geopolitical conflict eases, and the international crude oil risk premium subsides
Since late December last year, crude oil prices have continued to oscillate upward. An Ziwei, a senior energy analyst at the Shanghai Orient Securities Futures and Derivatives Research Institute, said that there are both fundamental factors, short-term supply cuts and geopolitical influences. The most recent market concerns are mainly geopolitical influences.
According to Yang An, the head of Haitong Futures Energy and Chemical, so far, the impact of the Russian-Ukrainian conflict on oil prices is mainly at the expected level. Fears of disruption have thus pushed up oil prices, mainly due to Russia’s irreplaceable position in the energy market. As we all know, many people blame the 2021 European natural gas crisis on Russia’s lack of gas supply to Europe. Russia is also one of the world’s largest crude oil producers and the world’s most important crude oil exporter, which has a significant impact on the global crude oil market. At present, global crude oil inventories are at a 7-year low, and the supply of crude oil is tight, and the market’s worries about this are at a high level. Once the situation gets out of control, a war or sanctions from Western countries such as the United States and the European Union will result in the impact on Russia’s energy exports, which will inevitably exacerbate the supply shortage. This situation will have a huge impact on the crude oil market.
“From the beginning of the Spring Festival holiday to the present, the international oil price has risen by 7-8 US dollars per barrel. The core factor is the heating up of the geopolitical situation around the Ukraine issue. The United States first dispatched troops, and last week, it released the news that Russia would invade Ukraine this week. It has caused market concerns about the stability of crude oil supply. If the relationship between Russia and Ukraine further deteriorates or continues to create topics around this geography, there is no doubt that oil prices will rise further. Yang An said.
“The tension between Russia and Ukraine has generated a geopolitical risk premium. At present, Russia’s crude oil supply has not had a substantial impact. However, as one of the world‘s important crude oil producers, once exports are restricted, it is difficult for any country to fill this in a short period of time. The market’s concerns stem from this, but it is still a small probability event that sanctions or export restrictions are expected, so the risk premium is moderate. The latest news shows signs of easing in the situation in Russia and Ukraine. If there is no further escalation in the future, the subsidence of the risk premium will lead to a slight decline in oil prices. Callback, return to fundamental pricing.” An Ziwei said.
In addition, An Ziwei believes that in this wave of rising prices, less-than-expected supply is also an important price boosting factor. OPEC+ maintains its plan to increase production by 400,000 barrels per day per month, but due to the production bottleneck in some countries, the continuous production increase is less than expected, and the market is increasingly concerned about whether it can increase production in full. At present, spare capacity is concentrated in the hands of limited countries such as Saudi Arabia and the United Arab Emirates, which gives them a greater say in the pricing of oil prices. Although OPEC+ faces external pressure, it is still slightly weaker than in the past. An important variable on the supply side is that the United States is still increasing production slowly. The number of drilling rigs rebounded sharply in the latest week. After the inventory wells were largely consumed, the future production recovery will be more dependent on drilling rigs, and the US output maintains a moderate growth trend.
“The progress of the Iran nuclear deal negotiation is another important geopolitical risk factor in the future. The expected return of Iranian supplies to be priced in the future may trigger periodic price corrections, but low inventories and low idle capacity will continue to support oil prices. The judgment of the strong trend of oil price fluctuations.” An Ziwei said.
In Yang An’s view, whether the Fed raises interest rates more than expected is also critical to the performance of oil prices. At present, in the face of 40-year high inflation, the rhythm of liquidity tightening is the focus of the market, which will directly affect the crude oil market. the overall financial market trend.
“At present, the supply of crude oil in the market has not been affected by the conflict between Russia and Ukraine for the time being, but the market is worried that the situation will get out of control, a war or Russia’s invasion of Ukraine will trigger sanctions from Western countries, which will affect Russia’s exports of crude oil and natural gas and other energy products. Increase the current supply shortage in the energy market. On the one hand, we are worried about the soaring oil price due to the out-of-control relations between Russia and Ukraine, and on the other hand, we must also guard against the risk of the final war expectations being dashed. The statements of the parties involved, Russia and Ukraine are still relatively restrained, and other NATO members, such as Germany and France, are not willing to get out of control, so it is not small that the situation will be eased through diplomacy in the end. Yang An said that in addition, we must also pay attention to the runaway inflation in the United States and Europe. If the United States and Europe are not strong enough to control inflation, the market may still trade high inflation expectations, which will also keep oil prices. Possibility of strength or further upside.
Iron ore down 18% in three days
In response to the recent changes in iron ore prices, the Price Department of the National Development and Reform Commission, the Price Supervision and Competition Bureau of the State Administration for Market Regulation, and the Futures Department of the China Securities Regulatory Commission recently jointly held a meeting to learn more about the changes in port inventories of iron ore trading companies and their participation in iron ore Regarding the trading of stone spot and futures, remind and warn relevant companies not to fabricate and publish false price information, not to fabricate and spread price increase information, not to hoard, not to maliciously hype, and not to drive up prices.
The National Development and Reform Commission, the State Administration of Market Supervision, and the China Securities Regulatory Commission are highly concerned about changes in iron ore prices, and will take further effective measures to effectively maintain the normal order of the spot and futures markets; strengthen market supervision, and deal with fabricated and disseminated price information, hoarding, and price gouging, etc. Violations and violations will be severely punished.
On February 15, the pressure of policy supervision was further increased, and the main iron ore contract fell by the limit, a drop of 9.98%, and the capital outflow was 1.441 billion yuan. In fact, the price of the main iron ore contract 2205 hit a high of 849.5 yuan per ton last Friday and began to fall sharply, with the largest cumulative decline in three trading days being nearly 18%. The decline in Singapore iron ore swaps also expanded rapidly, falling more than 10% on the day.
Xie Xu, deputy general manager of the Western Futures R&D Center, believes that from a fundamental point of view, the global iron ore supply will still increase in 2022, and the overall supply will still be sufficient; Under the influence of the “double carbon” policy, pig iron production will continue to be suppressed, and it will be more difficult for production to return to historical highs. The overall supply and demand of iron ore tends to be loose, which does not support a sharp rise in iron ore prices. In the short term, domestic policy-level regulation and supervision continue to increase, impacting market sentiment, and iron ore prices still have room to fall. Investors should pay attention to preventing risks.
The aluminum industry has a “stock crisis”, and the global copper inventory has shrunk sharply
As far as the influence of Russian-Ukrainian geopolitics on the non-ferrous metal sector, Zhan Dapeng, director of non-ferrous metals at Everbright Futures Research Institute, believes that there are two sides. First of all, if the geopolitical situation in Russia and Ukraine intensifies, it will suppress risks in the global financial market. Under the expectation of rapid tightening of liquidity, the derivatives market will also be affected, which will have a negative impact on non-ferrous metals. Secondly, non-ferrous metals are also strategic metals, and Russia is a major producer of non-ferrous metals. If Russia is severely sanctioned, the supply side of non-ferrous metals will undoubtedly “worse”. From past experience, under sanctions, Russia will be sanctioned, and there will be a short-term impact on the formation of two varieties of aluminum and nickel. Strong driving force, the price difference between internal and external will also be distorted.
In fact, the current aluminum price has risen sharply. In this regard, Wu Haode, a researcher at Changjiang Futures, said that the logic of the strengthening of aluminum prices can be summarized as a “stock crisis”. On the one hand, in terms of production capacity indicators, since 2021, domestic and foreign electrolytic aluminum production capacity has been continuously disturbed. The electrolytic aluminum production capacity in Europe has been reduced by more than 800,000 tons due to the surge in electricity prices stimulated by energy shortages. With the current confrontation between Russia and Ukraine and the further escalation of tensions, Rusal will be sanctioned or Russia will cut off supply to Europe. The possibility of further reductions in production at aluminum plants due to natural gas. Domestic electrolytic aluminum production capacity will lose more than 2 million tons in 2021 due to dual carbon and power curtailment, and will slowly recover 500,000 tons in the fourth quarter. The increase in production capacity will have to wait until the middle and late March, and it is difficult to quench the thirst of the near water. On the other hand, in terms of inventory indicators, the current LME inventory has dropped to less than 900,000 tons, a decrease of 1.1 million tons from the peak of last year, reaching the lowest level in the same period in history. Implying a hefty premium to get the spot. The domestic social inventory of aluminum ingots may not reach 1.2 million tons this year, which is also the lowest level in the same period in the past five years. The peak season is approaching, and limited supply and low inventory will provide support for the continued rise in aluminum prices.
“Currently, the LME aluminum price is close to the highest level in history in 2008, and the domestic price is also close to the highest level last year. In this regard, the market has a certain fear of heights, and the foreign strong and the weak import losses, which also shows that the domestic market is relatively high for high prices. Be more cautious. At present, investors need to test the terminal’s ability to undertake and whether high-priced downstream and downstream alternatives can follow up quickly, such as whether automobile manufacturers slow down the pace of lightweighting, whether home manufacturing and decoration reduce the application of aluminum alloys, etc. This process Under the absolute high price of electrolytic aluminum, it is bound to be carried out subtly, and it will also be reflected in the premium and discount and inventory, which will eventually negatively feedback the current price.” Zhan Dapeng believes that the current high price of electrolytic aluminum will stimulate the release of the supply side. , but the production of electrolytic aluminum in the past two years is not only affected by profits, but also from policy influences and restrictions, such as global carbon emissions, the European energy crisis, and the dual control of domestic energy consumption.
In Wu Haode’s view, the current price focus of aluminum prices has moved upward, and aluminum prices will remain strong in the first quarter. The upper target may be 23,800-24,000 yuan/ton. If the contradiction is further intensified, it is not ruled out that the price will rise to the top. possible. In the medium term, the high profits brought by high prices stimulate the resumption and increase of electrolytic aluminum production capacity. Judging from the indicators, Yunnan has 1.1 million tons to 1.2 million tons of resumable production capacity that will be gradually produced in the middle and late March, and 800,000 to 1 million tons of new production capacity will be put into production in the second quarter and the second half of the year, and then superimposed The impact of interest rate hikes, which will have an impact on electrolytic aluminum prices at that time. In the long run, due to the limitation of the production capacity ceiling, the putable production capacity of electrolytic aluminum is relatively limited, and it is necessary to seek increments in recycled aluminum. In general, aluminum has bid farewell to the operating state of low prices, low profits, and low volatility in the past, and has entered a new normal of high-quality supply, high-quality demand, and high-quality profits.
In terms of “Dr. Copper”, low inventory has become the focus of the market. Last Tuesday, the LME’s inventory report showed that the upward trend in LME copper inventories at the beginning of the year has reversed, and it is now down 10% from the beginning of January to 79,925 tons. Daily trading volumes also fell to 2,500 tonnes from 10,000 tonnes in October last year. In addition, during the Spring Festival holiday, the Shanghai Futures Exchange’s inventory was only 40,359 tons.
“At present, the market has a lot of controversy over the continuous depletion of LME inventories. The bulls believe that the LME inventory has been continuously consumed, while the bears believe that the LME inventory has been deliberately hidden and re-converted into hidden inventory, which is more controversial. However, The continuous destocking of the LME and the historically low inventory have made the spot maintain the premium pattern, and aggravated the bullish sentiment in the market, and the sentiment of squeezed positions is also looming.” Zhan Dapeng said.
According to Qu Yajuan, an analyst at Changan Futures, the shrinking of global copper inventories is mainly due to the rapid expansion of demand after the epidemic and the slow recovery of supply. It is the “fruit” of the previous economic operation. The spot premium of LME0-3 remains at around US$30/ton. , indicating that the spot supply is still tight, and the short-term support for copper prices is still effective, but in the medium and long term, the impact of the epidemic continues to weaken, and the main copper-producing countries have added and resumed production capacity. The solution of the supply problem is only a matter of time. . Recently, domestic inventories have begun to accumulate seasonally and are basically close to the level of the same period last year.
“Recently, the conflict between Russia and Ukraine has intensified, and risk assets are under pressure due to geopolitical risks. The rise in crude oil prices has exacerbated inflation concerns. As March is approaching, the Federal Reserve may raise interest rates or make some moves, and the background of tightening liquidity is also bearish. Metals. Although the possibility of war is unlikely, the hype will cause relatively large fluctuations in the market. Due to concerns about Russia being sanctioned, its large supply of aluminum and nickel will be relatively positive.” Qu Yajuan said.
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