2022 in the crude oil market: the energy crisis has swept the world, oil prices have been on a roller coaster, what is the future

In 2022, the energy crisis swept the world
.

International oil prices have been on a roller coaster, soaring to nearly $140 / barrel at the beginning of the year, and near the end of 2022, they have fallen sharply to around $70 / barrel, with volatility of nearly 100%.

Looking back at the crude oil market this year, "OPEC+", the United States, the European Union, the Middle East, etc.
took turns to affect the crude oil market from all aspects, and there was a trend
of "you sing and I appear".

Soaring all the way

In March, the outbreak of the Russia-Ukraine conflict raised global risk aversion, and the price of crude oil, the king of commodities, soared
.

Because the market is worried about the risk of supply disruption, it is difficult for supply to meet demand, causing oil prices to "get out of control"
.

On the 8th of the same month, the main contract prices of Brent crude oil futures in New York and the United Kingdom closed at $123.
7 / barrel and 127.
98 US dollars / barrel, respectively, reaching a new high
since 2008.
Three days later, WTI crude oil futures soared to $130.
5/barrel, up 97.
07% from the closing price on December 3, 2021, and Brent crude futures soared to $139.
13/barrel on the day, up 98.
36%.

In June, the European Union's decision to completely ban Russian oil imports added fuel to the fire
.
The EU announced an agreement on the sixth round of sanctions against Russia, that is, an immediate ban on the import of 75% of Russian oil, with the temporary exception of oil supplied through pipelines, which means that Western sanctions against Russia have further escalated
.

At that time, ICIS global crude oil analyst Barney Gray said in an interview with the first financial reporter: "The recent new round of EU sanctions against Russia may lead to an oil embargo of more than 2 million barrels / day, but now OPEC+ has committed to increase production by only 216,000 barrels per day
.
" ”

High consolidation

In order to stabilize oil prices, the United States announced the release of strategic reserves, and throughout the second quarter, oil prices basically consolidated
at a high level.
At the end of March, the United States announced that it would release 1 million barrels per day of oil from its Strategic Petroleum Reserve over the next six months, for a cumulative release of 180 million barrels
.

The first financial reporter noted that since the United States announced the accelerated release of the Strategic Petroleum Reserve (SPR), the main contract of WTI crude oil futures fell from a high of nearly $120 / barrel in June to about
$80 / barrel in November.
”

"The U.
S.
Strategic Crude Oil Reserve System was first established to deal with short-term oil supply shocks
.
" Gui Chenxi, chief energy analyst of CITIC Futures, told the first financial reporter that "the large number of strategic reserves in the United States this year has effectively supplemented short-term circulation and supply, and to a certain extent, inhibited the risk
of a sharp rise in oil prices.
" If the United States switches to buying back strategic stocks next year, it will give a partial boost to demand, or it may prevent the risk
of a sharp fall in oil prices to some extent.
”

In October, the long-short game between the United States and OPEC+ in the crude oil market became intense
.
Seeing that New York oil prices fell below $80 per barrel at the end of September, OPEC+ announced that it would reduce its crude oil production quota and regulate crude oil supply by reducing production
.

On the 5th of the same month, "OPEC+" (including 13 OPEC members and 10 non-OPEC oil producers led by Russia) officially announced a quota reduction of 2 million barrels per day
at its monthly meeting.
The cut is the largest since producers agreed to sharp cuts after the pandemic in 2020, equivalent to 2%
of global oil exports.

Stimulated by the news of OPEC+ exceeding expected production cuts, the volatility range of international oil prices was raised from 80~90 US dollars / barrel before the news was announced to 90~100 US dollars / barrel
.
In just five days, New York oil prices rose 16.
54% and Brent oil prices rose 11.
32%, both recording their biggest weekly gains in seven months
.

Giving back the increase

Heading into November, the entire market was shrouded in recession fears, and demand for final oil consumption continued to languish
.

The weak demand performance is directly reflected in oil prices, which once fell below $80/barrel from a record high of $140 / barrel in the middle of the year, "giving up" all the
gains since the Russia-Ukraine conflict.

On November 28, international oil prices fell to a new low in nearly 11 months, the main contract of WTI crude oil futures fell to 73.
60 US dollars / barrel, and the main contract of Brent crude oil fell to 80.
81 US dollars / barrel
.

Zhong Zhengsheng, chief economist of Ping An Securities, pointed out in the report "Chief Macro Report: Oil prices driven by weak demand to hit a new low in the year" that since November this year, international oil prices have continued to decline, hitting a new low
for the year.
"On the one hand, because the formal implementation of the 'price limit order' for Russian crude oil exports has exacerbated oil price volatility, on the other hand, it also reflects the market's pessimistic expectations
for demand.
"

Talking about the driving force behind the rare "six consecutive declines" in international oil prices in early December, Jiang Na, an analyst at Jinlianchuang refined oil products, believes that "this is due to investors' concerns about multiple negative factors such as the Fed's continued aggressive interest rate hike policy, the US Energy Information Administration (EIA) lowering its energy demand forecast, and the increase in refined oil inventories
.
" ”

In addition, institutions are not optimistic about global economic growth, which in turn erodes already low demand
for crude oil.

The Organization for Economic Co-operation and Development (OECD) forecasts that global economic growth will slip to 2.
2 percent in 2023, down from 3.
1 percent in 2022
.
Among them, the economic growth rate of the United States will slow from 1.
8% in 2022 to 0.
5% in 2023, and the eurozone will fall from 3.
3% to 0.
5%.

"Due to the slowdown in world economic growth due to the impact of the three-year epidemic, the global economic growth rate will slow down from 3.
2% this year to 2.
7% next year, but there is a one-quarter probability that the actual growth rate will be less than 2%
.
" The IMF forecast
.

In December, OPEC lowered its crude oil demand forecast for the first quarter of next year in its monthly report, and global crude oil demand for it is expected to fall by 380,000 b/d
compared with the previous month.

As 2022 draws to a close, another factor affecting the price reduction of oil prices is the implementation of
the Russian oil price ceiling and embargo and sanctions policy.

On December 5, the European Union, the Group of Seven (G7) and Australia began to impose a price cap
of $60/b on Russian seaborne exports.

The price cap means that anyone who wants access to key services provided by the EU, especially marine insurance, can only buy Russian oil
below this price cap.
A week after the price limit was implemented, the European market, which was once highly dependent on Russian oil, basically stopped importing crude
oil from Russia.

How will oil prices go in 2023?

Looking forward to the future market, Zhang Yu, assistant director and chief macro analyst of Huachuang Securities Research Institute, believes that although the current trend of international oil prices clearly shows the logic of demand expectation pricing, and the demand side may indeed be the main clue to next year's oil price changes, the market seems to be insufficiently priced for supply shocks, and we should still be wary
of short-term supply and trade disturbances that may occur due to non-economic factors.

Zhongtai Securities analyzed that in view of the fact that the "limit order" for Russian oil is still in the transition period and the limit price is higher than the cost and market price of Russian oil, in the short term, the global oil price trend will remain range-bound; In the medium and long term, as the pressure of OPEC production cuts increases, coupled with warnings that Russia may further reduce production in the future, the supply side of the market will still tighten
.

"Brent crude oil prices are expected to rise to $110/b
by the end of 2023.
" Morgan Stanley believes that the fate of the oil market in 2023 will largely depend on uncertainty in seven key areas, including the recovery of the aviation industry, the demand situation in China, the EU embargo on Russian oil, the tightness of diesel supply, the outlook for shale oil and gas in the United States, the end of the release of the US Strategic Petroleum Reserve (SPR) and capital spending
in the energy sector.