Currently, the bond market, stock market, and commodity markets represented by crude oil are all paying close attention to the Fed’s next move. For the international crude oil market, it can be said that macro factors are the most important factor affecting the current situation, so the final statement of the Federal Reserve is very critical. Prior to this, international crude oil rose rapidly due to the escalation of geopolitical conflicts.
“At present, if the Fed takes a tough stance and accelerates the tightening of monetary policy, it will have an impact on market risk appetite, easily triggering a sharp fall in the stock market, and also put some pressure on oil prices. If it is a dovish stance that stabilizes market sentiment, Then the attention of investors in the crude oil market will shift back to geopolitics and other factors, and oil prices will most likely maintain a strong pattern.” said Yang An, head of energy and chemical R&D at Haitong Futures.
According to Yu Pengsen, a researcher at Zhaojin Futures, raising interest rates by the Federal Reserve has always been expected by market transactions.
“The U.S. stock market, in particular, has been declining for many days. It has now fallen below most of the technical supports, and only a theoretical rebound is possible. This is a normal response to the latest U.S. policies. Strictly speaking, strong The U.S. dollar will restrain the rise of crude oil and may even cause the decline of crude oil, but crude oil is not the only influencing factor of the U.S. dollar,” Yu Pengsen said.
In fact, the main factor affecting the recent surge in international oil prices is geopolitical conflicts, especially the Ukrainian issue. According to Yu Pengsen, the current negotiations between NATO and Russia have ended in vain. Both sides are unwilling to make concessions on issues they care about. The United States has even threatened to impose unprecedented severe sanctions on Russia. This is undoubtedly one of the main reasons for the strong oil prices.
In addition, the reporter learned that the production increase in OPEC+ countries continued to fall short of expectations, which also triggered a series of reactions. Yu Pengsen said that due to the continued high oil prices, the United States has once again announced that it will release 13.4 million barrels of strategic crude oil reserves.
“The overall inventory of the crude oil market is currently at a seven-year low. If there are some supply shortages, including geopolitical risks or OPEC+ production increases that are less than expected, under the current background of high overseas inflation, it will inevitably further stimulate the market to be bullish on oil prices.” Yang An said that of course we do not want to see this kind of phenomenon that damages the economy, but we must remain vigilant and prepared to deal with this risk.
In Yu Pengsen’s view, for oil prices, geopolitical conflicts and the inability to alleviate the contradiction between supply and demand will always be supported, but this does not mean that the center of gravity of oil prices will shift upward again. He explained that according to the supply and demand expectations of OPEC+ and EIA, international crude oil will achieve a balance between supply and demand in the first quarter of this year. Prior to that, U.S. crude oil inventories have basically bottomed out and recovered, and institutional investment banks’ bullish expectations for oil prices are limited to the first quarter. This shows that everyone has a weakening understanding of the oil price and the supply and demand balance in the oil market in the future. After suffering some negative pressure in the short term, even a short-term decline in oil prices can limit the pace of continued rise. Citing the statement of Saudi Arabia, the main OPEC country, OPEC does not pursue excessively high oil prices, but pursues a balance between supply and demand.
Judging from the recent performance of international oil prices, volatility continues to intensify. In this regard, Yu Pengsen believes that the first is geopolitical conflicts, and the second is that there are large differences in short-term market expectations. After all, there are still many institutions that are pessimistic about oil prices during the year, which will trigger continued wide range oscillations in oil prices. Looking at the market outlook, the expectations for oil prices are still unclear and still need to be observed. The short-term is not a good time to participate in crude oil.
“Macro factors and geopolitical risks are the core factors affecting oil prices now and in the future. However, the difference between the actual development of these influencing factors and market expectations will cause investors’ logic to swing, which can also easily lead to instability in market sentiment. This has triggered significant fluctuations in oil prices, and the recent performance of the crude oil market and U.S. stocks reflects the current market swings,” said Yang An.
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