The "huge earthquake" in international oil prices highlights the balance vulnerability of the oil market

On November 21, around the rumors of OPEC production increase, the international oil price shook by more than 6%
within the day.
Although oil prices have moved higher on an overnight close at press time, the vulnerability of the current supply-demand balance in the international crude oil market has also been exposed
.

On the evening of the 21st Beijing time, the Wall Street Journal quoted anonymous sources as saying that "Saudi Arabia and OPEC oil producers are discussing increasing production by up to 500,000 barrels per day to cope with the decline in Russian oil exports"
.
As soon as the news came out, international oil prices plunged, and U.
S.
crude oil and Brent crude oil plummeted, of which U.
S.
oil fell by nearly 6%.

At that time, it was the domestic night trading session, and the plunge in international oil prices caused a collective decline in domestic chemicals
.

But then, Saudi Energy Minister Abdulaziz bin Salman denied rumors of an increase in production and said in a statement that the current 2 million b/d cuts would last until the end of
2023.
This news directly led to a "V" reversal in oil prices, and the US oil market once turned red
.
By the close of trading on the 21st, U.
S.
oil and cloth oil only closed slightly down less than 1%, and domestic chemicals also rose
sharply after the opening of trading on the morning of the 22nd.

Why can the current volatility of the crude oil market be so easily "stirred"? Analysts said that this is mainly because the crude oil market is facing the pressure of falling demand, and the supply side has become very vulnerable
to price support.

For the current oil prices, the main support comes from the supply side, mainly including OPEC+ previous production cuts that exceeded expectations, as well as the Group of Seven (G) price limit policy and the EU's concern
that the ban on Russian seaborne crude oil may cause Russian crude oil production to be cut after the entry into effect 。 According to the latest foreign media reports, on Tuesday (22nd), in response to the upcoming G7 policy for Russian crude oil price caps, Russian Deputy Prime Minister Novak said in a statement that Russia does not intend to supply crude oil or petroleum products to countries that implement price caps, on the contrary, Russia will shift oil supplies to "market-oriented partners" or reduce production
.

It is precisely because of supply concerns that many institutions expect oil prices to remain high
.
Commerzbank reiterated its forecast
on the 22nd that the price of Brent crude oil will reach $95 / barrel by the end of this year.
UBS Wealth also predicted in a report on the 22nd that global oil demand will continue to rise, and further tightening of supply and demand will support oil prices to return to above
the $100 per barrel mark in the next few months.

However, after successive sharp interest rate hikes by the Federal Reserve, negative feedback on the demand side has become the dominant factor
in the past five months as fears of recession in Europe and the United States have gradually heated up.

In its October statement, OPEC explained the cuts "in view of the uncertainty facing the global economy and oil markets and the need to strengthen long-term guidance for oil markets.
"
This uncertainty mainly comes from the demand side
.
Since April, OPEC has cut its forecast for global oil demand growth this year and next five times in its monthly report
.
In its monthly report for November, OPEC lowered its forecast for world oil demand growth for the whole year 2022 to 2.
55 million b/d and its forecast for the whole year 2023 to 2.
24 million b/d
.

"From the current market point of view, supported by OPEC+ production cuts of 2 million b/d, the market presents a fragile balance
.
At present, the important variables mainly look at the production actions
of OPEC, Russia and the United States.
Whether Saudi Arabia will relax its stance on reducing production or even increase production under the influence of political demands has become the biggest contradiction at present, which is also the biggest variable
whether the balance sheet is reversed.
Zhong Meiyan, director of energy research at Everbright Futures Research Institute, told
Xinhua Finance.

However, she also pointed out that the recent trend of oil prices and other industrial products has shown a clear divergence, mainly because supply-side concerns have eased, and the closer to the point of sanctions, the clearer the market is
.
From a market point of view, Europe has the ability to replace Russian oil with crude oil from the Middle East, the United States and Latin America, and Asian markets have increased their use
of Russian crude oil.
In the context of economic slowdown, demand is facing downward pressure overall, globally, US demand still has a certain degree of resilience, but refined oil products have begun to accumulate, and domestic demand is still difficult to marginally improve
significantly under the uncertainties of the epidemic.
Therefore, the current crude oil market is showing a resonance decline, oil may test the 80 US dollars / barrel of the first line of support, US oil may test the 72 US dollars / barrel mark support, domestic SC crude oil prices or will continue to find the bottom, the low range of 550-560 yuan / barrel line
.