In the night trading of July 18, the domestic commodity market continued the desperate counterattack during the day and once again showed a general rise pattern. The crude oil department performed brilliantly and took over the cotton department as the vanguard of the counterattack. Among them, fuel oil rose by more than 6%, asphalt, low-sulfur fuel oil, and palm oil rose by more than 5%, coking coal, polyvinyl chloride, rebar, and coke rose by more than 4%, and plastics and liquefied petroleum gas rose by more than 3%.
External futures are also broadly in the red, with crude oil rising by more than 4%, natural gas rising by more than 5%, and U.S. cotton and U.S. soybean oil both rising by more than 4%.
Buffett increases holdings of oil stocks
In terms of oil prices, the Iraqi Oil Minister said that oil prices will exceed US$100 per barrel within this year, and OPEC+ needs to continue to work hard to manage supply and demand. Iraq’s oil minister said he hopes OPEC will retain the tools it uses to measure and control the balance between supply and demand.
Royal Bank of Canada said OPEC+ may decide to further moderately increase oil production at its next oil production meeting. The U.S. Energy Information Administration (EIA) expects U.S. shale oil production to increase by 143,000 barrels per day in July to 8.9 million barrels per day.
The latest news is that Buffett increased his holdings of Occidental Petroleum shares to approximately 181 million shares, and Berkshire Hathaway purchased approximately 1.9 million shares of Occidental Petroleum common stock from July 14 to 16. Berkshire now indirectly holds a total of approximately 181 million shares of Occidental Petroleum, and holds 100,000 shares of preferred stock and warrants to purchase approximately 84 million shares of common stock.
The U.S. Treasury Department releases its May International Capital Flows Report (TIC). The data showed that foreign investors’ holdings of long-term U.S. securities increased by $132.5 billion. Among them, foreign private investors’ holdings of U.S. long-term securities increased by $140.8 billion, while foreign official institutions’ holdings of U.S. long-term securities decreased by $8.3 billion. Additionally, when both international long-term securities and U.S. long-term securities are taken into account, foreign investor holdings of international or U.S. securities increased by $155.3 billion.
“Recession trading logic” comes to an end for now
The reporter learned that bulk commodities showed a “retaliatory” rebound, which was mainly affected by the following factors. First, many Federal Reserve officials have recently continued to cool down on raising interest rates by 100bp in July, and the University of Michigan consumer long-term inflation expectations in July dropped from 3.1% in June to 2.8%, the lowest level since July last year, which has affected 7 The probability of a monthly interest rate hike of 100bp has dropped from 80% to 28%. Second, the latest data showed that U.S. retail sales in June rose by 1% month-on-month, and were expected to rise by 0.8%, while the previous value fell by 0.1%. The preliminary value of the University of Michigan’s consumer confidence index in the United States in July was 51.1, which was expected to be 49.9 and the previous value was 50. Retail sales data and consumer confidence index rebounded, easing market concerns about a U.S. economic recession. Third, the domestic economy is steadily improving, with economic data such as retail sales, employment, and industrial added value further improving in June. Fourth, Biden officially embarked on a trip to the Middle East. This time he aimed to persuade Saudi Arabia and other Gulf oil-producing countries to significantly increase production. However, the current results are limited, and oil prices have rebounded sharply after the “boots landed.”
“The large-scale decline in commodities in the early period was mainly due to the market’s excessive panic about overseas economic recession. With the release of a series of domestic and foreign economic data, the market panic will be corrected.” Zheng Jianxin, a macro researcher at Guomao Futures, said that judging from the disk data , the market’s risk aversion has cooled down, but it is mostly the reduction of short positions that has led to a sharp rebound in market prices. Market confidence has recovered but is still cautious.
Cao Kai, a senior analyst at SDIC Anxin Futures, told reporters that during the recent overall decline in commodities, cotton is one of the varieties that has suffered a larger decline. The outstanding performance of cotton in the commodity rebound is more due to the bullish sentiment after a short-term oversold. A release.
“From a fundamental point of view, although the fundamentals of the cotton spinning industry are still weak, after continuous sharp declines, cotton valuations have reached a relatively low position, and the current processing profits of textile companies have been significantly restored. Cotton prices have been falling, and It is not conducive to downstream stocking and production. The cotton spinning industry also needs the stabilization of cotton prices to add a certain degree of confidence to the industry.” In Cao Kai’s view, this time the commodity has rebounded across the board, and the short-term macro impact may have weakened. If cotton prices stabilize in the future, the performance of demand will be the key to the mid-term trend.
“Since cotton prices have reached 35% in this round of decline, when there is an oversold rebound, the rebound will be very strong.” Bian Shuyang, an agricultural product analyst at Nanhua Futures, said that cotton futures are far lower than the spot, and short orders will make profits. There are more people leaving the market. At the same time, cotton-using companies will also buy cotton at a large discount and replenish the goods through futures.
In Bian Shuyang’s view, the market’s current rebound is more of a rebound caused by emotions and events, and is a recovery from the previous price drop. Because the short-term rise is too fast and violent, the duration of the rise may be shorter than expected. “Although the data released by the United States over the weekend were better than expected, it does not mean that the inflation problem has been solved. The Fed’s pace of raising interest rates will not stop, and the contradictions in global economic problems have not been alleviated. After the end of this round of rebound, there is still There is an opportunity for a new round of shorting commodities.”
Respondents generally believe that in the short term, the “recession trading logic” may come to an end.
“On the one hand, as commodity prices continue to fall sharply, inflation expectations will be eased in the second half of the year, and the Federal Reserve’s radical interest rate hike path may be gradually revised after a sharp increase in interest rates in July; on the other hand, U.S. retail and consumer informationData such as GDP and non-farm employment have improved, indicating that the U.S. economy is still stable and is still far from recession, and the state of excessive panic is expected to be corrected. In addition, the momentum of domestic economic recovery is still expected to continue. “Zheng Jianxin said.
From a macro perspective, after the release of U.S. CPI data in June, although it exceeded market expectations, U.S. President Biden later stated that there was a certain lag in the data. Since energy prices have an important impact on U.S. inflation, a sharp correction in crude oil eased energy prices. pressure, thereby easing inflationary pressure, and it is expected that the inflation data in July will fall significantly. “Driven by the correction of the US dollar, short-term commodities may no longer trade in recessionary logic, and each variety will gradually return to its own fundamentals.” Zheng Jianxin said.
However, it should be noted that the risk of a global economic recession is still rising. In the future, global aggregate demand will fall further. At the same time, supply shortages will gradually improve in the medium to long term. With the Federal Reserve leading global central banks to rapidly tighten policies, financial conditions will no longer be loose, and the medium and long-term trends of commodities will still face pressure.
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