Crude oil sharply fell logic and trend

Now the whole decline, mainly macro this factor dominates
.

Source: Datayes

Let's first look at the industry and macro two aspects of the situation, due to the rise of the dollar, the risk of recession in the US economy, resulting in crude oil risk aversion, we see that in fact, before the fall of crude oil, copper has seen a large retracement, at the same time, found that the dollar rally in the last two days is also very strong, then I will share with you the problem
.

First, why is the dollar so strong now? In the dollar index, 60% is the euro and the other 20% is the yen, so the weakness of the euro is a major reason for
the strength of the dollar.

We have a framework for crude oil, the entire influence of crude oil prices, divided into:

1) Macro demand

2) Supply and demand in the industry

3) And the financial markets
.

Financial markets trade the so-called correlation between the US dollar and these stock indexes, government bonds, and there are also some geopolitical policy conflicts
.

Now the main influencing variable is this volatility in the financial markets, so we see a rise in the whole dollar, for things like gold like crude oil like copper, which is currently at the heart of
a market.

In addition, the second influencing variable is the demand side, and we see a downward trend in the economy of the United States and Europe as a whole, which is the second impact level
.
But it's not exactly the demand side at the moment, because we don't see a widespread recession
in the U.
S.

So the main problem now is this movement
in the dollar.

The logic of the dollar

One of the main reasons for the fluctuation of crude oil, then we talked about the dollar earlier, mainly because the euro is weak, the weak euro is mainly due to the conflict of the Russian-Ukrainian war, leading to European energy tension, we see that now recently, the price of Dutch natural gas has hit a new high again, the price of British natural gas has been at 300, causing the entire energy in Europe to be very tight
.
Germany's restart of a coal power deal, in addition, has some problems like the Norwegian strike, leading to a tension
in natural gas and crude oil.
This is the main reason for the weakness of
the euro.
In addition, the ECB will start raising interest rates
in July.
This is also the main reason why the market expects a downward pressure on the European economy after the rate hike, so the euro is under pressure until these signs are
eased.

Then this is an important reason for the strength of the dollar, then the second reason for the strength of the dollar, or the Fed's policy is tight, in the face of this high inflation that has been rare in the past 40 years, if the Fed wants to maintain the market's confidence in the Fed to reduce inflation, then it must be beyond the conventional hawks, maintain the expectation of interest rate hikes, and the economy cools
.

So now, it is also the market's most worried problem, the current unemployment rate in the United States is at 3.
6%, there is no obvious re-rise in this unemployment, the Fed can bear the unemployment rate back to 4.
1, on the process of reducing inflation, causing economic recession, unemployment rate rises back to about three or four point one, which is affordable every year
.
Therefore, this recession transaction is this second layer logic of the market and an important reason for the strength of
the dollar.

Because the Fed's interest rate hike in the case of high inflation, which is another reason for the strength of the dollar, it also led to a decline in the price of this commodity, so the result of the interest rate hike, he will lead to a significant cooling of demand, which also increases the market's concern
about the risk of this decline in demand for crude oil.

The impact of actual demand

In fact, from the perspective of demand, the total demand for petroleum products in the United States now, the total demand for petroleum products announced has been lower than a price level in the same period last year, although summer is a peak of demand growth, but in fact, if you look at seasonality, the current demand for oil in the United States is still lower than the same period of previous years, especially the same period last year, so this demand may not return to the past one
.

The market is worried that after the Fed raised interest rates, demand will fall, which is an important reason for
the decline in crude oil prices.
So this place to pay attention to, in the environment of interest rate hikes, the general direction of the United States and Europe will be periodic recession, but overall, he may not have a big depression in the economy of 08 years, which should not appear, because the balance sheet of American companies and residents is relatively healthy, but in the interest rate hike environment, to reduce inflation, it is inevitable to reduce demand, and it will inevitably cause an economic downturn, which is relatively certain
.

Therefore, the trend of crude oil is weaker, and the second is that from the Chinese side, China's entire demand is not a particularly obvious rebound at present, including us
.
One of the characteristics of China's current round of economy is that it does not engage in flood irrigation
.
Real estate is still paranoid and cautious a marginal policy loose and cautious state, so from the data of real estate companies to take land and new construction, it is not particularly good, then this is under pressure on the price of China's threaded black industrial products, so we see that the South China industrial products index is falling
.
This macroscopically, but also on the price of crude oil has formed such a suppression, so from many aspects, the global European and American economic downturn, demand downturn, and China's does not engage in flooding, China's demand can not supplement or offset the decline in European and American demand
.

Therefore, this also causes a rise in market worry, then crude oil will be a little
short from this general direction.

Industrial inventories are low

Finally, I would like to add some views on the industry, at present, this industry is not a major logic of crude oil trading, the industry is more bullish
.
Because, the inventory of the entire industry is very low, we see that after the throw, the oil inventory of the United States, including the overall inventory of OECD countries, is very low, so the customers of the latter industry are also facing some demand for replenishment, so the industry listing for this oil price, is more favorable to see
.
And the current production, indeed OPEC's production, can not reach the previous level, OPEC's current production, than his expectation, that is, the target output, is lower to about 2 million to 3 million barrels, so the increase in production has not been up
.

Therefore, from the perspective of the industry, the downward space of oil prices is not particularly large, because there is such a rigid demand
.
And the epidemic will gradually become a thing of the past, and this economy will gradually return to this space
of normal demand.
Therefore, there is such a normal replenishment demand in the replenishment, so in such a range of 100 to 90, in fact, there will not be much
room for decline.
This is an important case where the main content is basically these
.

At present, the market is overly worried about the recession, the supply and demand of the industry is still tight, and there are some very details about macro and industrial tracking, so it is not too developed
.
The core problems are these
.