International oil prices continue to be sluggish, but SC crude oil is strong against the fall!

In the third week of August, the commodity market suddenly changed, risk appetite cooled again, some industrial products began to fall again, and a number of chemicals even updated the year's
lows.

When international oil prices continue to be sluggish, SC crude oil not only resists the decline strongly, but also the center of gravity is also higher, and the price difference with international oil prices has widened rapidly, from discounted Brent crude oil to a sharp rise situation, which has aroused the attention
of all parties in the market.

In fact, the performance of SC crude oil is a phased product of the reshaping of the global crude oil trade pattern after the Russian-Ukrainian conflict, and there are obvious differences in regional supply and demand in the crude oil market after the Russian-Ukrainian conflict, which has also caused the cross-regional price difference between Europe, the United States, the Middle East and the Asia-Pacific region represented by China to fluctuate sharply since this year, which is rare
in history 。 Among them, the US market has gradually recovered shale oil production and set a record strategic crude oil release, making WTI crude oil a global oil price depression, and US crude oil has also become one of the most cost-effective oil products, which has pushed US crude oil exports to reach 5 million barrels / day last week, continuing to set a new historical record
.
Such export figures are second only to Saudi Arabia and Russia
globally.
As Russian crude oil faces sanctions from Western countries, part of Europe's demand has shifted to Middle East crude oil, which has promoted the recent strengthening of Middle East crude oil, greatly narrowing the price gap with Brent crude oil, which also indirectly lays the groundwork for pushing up SC crude oil with Middle East crude oil as the delivery oil
.

Let's sort out the logic of
the strength of SC crude oil, especially the near-month contract.

Middle Eastern crude is strong

As we all know, China's SC crude oil delivery oil is mainly Middle East crude oil, so the theoretical pricing of SC crude oil is Middle East crude oil + freight + other miscellaneous charges
.
Therefore, the theoretical price of SC crude oil in the normal market is usually higher than the price of Middle East origin due to cost issues, and recently due to the increase in demand, the price trend of Middle East crude oil is significantly stronger than that of Brent crude oil, Saudi Aramco raised the price of light crude oil sold to Asia in September to $9.
8 / barrel, a record high, which also promoted the strength of China's SC crude oil
.

The SC crude oil purchase period for delivery in August was higher in oil prices

It usually takes more than a month from the Middle East to transport to domestic registration of warehouse receipts, and according to industry experts, the corresponding purchase time for crude oil that can usually be delivered in August is June, which is the mid-year high of oil prices, which means that the cost of crude oil used for delivery in the August contract of SC crude oil is higher
.

Crude oil freight rates rose sharply

In addition to the higher cost of crude oil for delivery, crude oil freight rates from the Middle East to China have risen sharply recently, rising nearly 40% from the year's low, further driving the strength
of SC crude oil.
The biggest impact of EU sanctions on Russian oil is to reshape the global trade pattern, Europe will urgently look for other alternative suppliers such as the Middle East and the United States, and the Asian region will also increase the purchase of Russian crude oil, which will increase the freight rate of some VLCC ships and transatlantic routes
.

SC crude oil registered warehouse receipts are at a relatively low level

There is another condition on the futures market that makes SC crude strong: SC crude oil warehouse receipts have fallen to a record low of only 1.
97 million barrels
.
In August 2020, SC crude oil warehouse receipts exceeded 45 million barrels and reached a peak, which pushed SC crude oil to continue to weaken, from a premium structure to a discount international oil price, which lasted for nearly two years
.
The current warehouse receipt situation means that the delivery pressure of SC crude oil is small, and in the context of the general weakening of commodities, it further attracts funds to allocate more funds to SC strategy
.

The valuation of SC crude oil in the early stage is low, and there is a need for repair

This year, domestic crude oil demand fell sharply in April, and the performance of SC crude oil was also significantly weaker than that of the international market, deeply discounting international oil prices, which provided space for SC crude oil to strengthen relative to international oil prices, and with the recovery of domestic crude oil demand and the phased popularity of the refined oil market, market sentiment has changed
.

In summary, the recent strong performance of SC crude oil objectively reflects the difference
in oil prices caused by the cross-regional supply and demand differences in the global crude oil market.

From the listing of SC crude oil in 2018 to the present, the market activity has gradually increased in more than 4 years, the transaction amount has steadily ranked first in commodities, and the market attention has been continuously improved, and the fluctuation of SC crude oil prices can objectively reflect the direct differences between China's crude oil market and other regional markets around the world, and transmit the voice
of the Chinese market to the world.
The current premium structure of SC crude oil and Brent crude oil is reasonable, and it is expected that the strong situation of SC crude oil to international oil prices will continue for a period of time until the cross-regional price difference for Middle East crude oil begins to attract market participants to re-register SC crude oil warehouse receipts
.

Does the supply and demand side still support the oil price to continue to fall sharply?

The main downward thrust in the pullback market that began in the middle of the year is the risk of global recession and the weaker-than-expected demand side of crude oil, especially the weaker-than-expected recovery of the demand side, which has greatly eased the pressure of
tight supply.
This also made the monthly difference structure of the crude oil market, which has been strong, fall rapidly after July, especially the WTI crude oil monthly difference structure was close to flat water
in the main and second months.

From the EIA's short-term energy outlook, the accumulation expectation in 2022 is mainly concentrated in the third and fourth quarters, which is also the key reason for the continuous decline in oil prices in the past period.

As WTI crude oil hits $85 / barrel, whether the supply and demand level will further lead to a decline in oil prices has also become a factor
that the market needs to pay attention to.

The latest EIA weekly report shows that US crude oil and refined oil products have fallen sharply, far exceeding market expectations
.
Crude inventories plunged 7.
1 million barrels to 425 million barrels in the week ended Aug.
12, compared with an estimated 275,000 barrels
decline, the data showed.
In addition, US gasoline inventories fell by 4.
6 million barrels last week, and more importantly, US gasoline and diesel consumption data rebounded, which has served as a good relief from previous demand concerns and contributed to the short-term rebound
in oil prices.
In addition, U.
S.
full-caliber inventories remain at multi-year lows, which means that the pressure on the crude oil market can change market expectations and put pressure on oil prices, but it will not cause a collapse in oil prices
.

In addition, the supply side should pay attention to two factors: first, the final result of the Iranian nuclear agreement, which is highly concerned by the market recently, the market is waiting for the final response of the United States, and the United States has not given a reply so far; The second is to pay attention to the follow-up impact
of the EU embargo on Russian oil on the supply side in the coming months.
Demand level is still not optimistic, the downward pressure on the global economy is obvious, the annual crude oil demand expectations have been repeatedly lowered, the recent Chinese refined oil market gasoline, diesel prices have rebounded strongly, local refinery refining gross profit hit the high of the year, but did not stimulate refineries to increase processing volume, last week the start of local refining also showed a certain decline, China's market demand recovery slowly, for increasing the supply of refined oil, refineries are still more cautious.

However, the recent rebound in crack profits in China, Europe and the United States has helped oil prices stabilize.

Although the previous surge in natural gas prices in Europe has limited boost to oil prices, as it continues to set new historical records, if extreme weather continues, it cannot be ruled out that it will eventually push up oil prices
.

The influencing factors of the crude oil market are still relatively complex, and it is certain that the basis for the super bull market in oil prices no longer exists, and international oil prices, especially WTI crude oil, have also entered a technical bear market stage
.
The data showed that speculative bulls continued to withdraw, and NYMEX's net long position in WTI crude oil decreased by 28,979 contracts to 290388 contracts, a new low
in the last two years.
Due to geographical factors and sanctions against Russia, the trade pattern of the crude oil market has changed greatly, purely from the perspective of changes in supply and demand in the crude oil market, oil prices are in an unstable stage, and at the level of controlling inflation and preventing economic recession, countries around the world will also vacillate
in regulation and control.
Recently, the market has repeatedly oscillated on the Fed's 50 basis point and 75 basis point rate hikes in September, which will also affect market expectations
.

Overall, the strong pattern of the US dollar will continue in the context of interest rate hikes, and the commodity market will continue to be under pressure
of tightening liquidity.
Oil prices are likely to enter a large range of fluctuations, this round of high oil prices has lasted for 2 months, if there is no further impact of the Iranian nuclear agreement, short-term oil prices are expected to enter a long-short phase of tug-of-war
.