On Wednesday, July 6th, Eastern Time, concerns about a recession topped the list, crude oil futures closed down collectively, and both U.S. oil and Brent oil fell into a bear market.
wti August crude oil futures closed down $0.97, or 0.97%, at $98.53/barrel on Wednesday, continuing to hit a new low since April. It has fallen 20.3% from the US oil settlement high of $123.70/barrel on March 8. It means that U.S. oil has fallen into a technical bear market ; ICE brent crude oil futures for September closed down $2.08, or 2.02%, at $100.69 per barrel, falling below the $100 mark during the session, and Brent oil fell 21.32 from the recent high %, also entered a bear market .
Analysts pointed out that in addition to the recent supply and demand impact of crude oil and fears of economic recession, panic has once again dominated the sell-off of risk assets, the thin trading after the US Independence Day holiday on Monday may amplify the volatility of the stock market, and crude oil futures price fell below key support levels. Technical factors are also at play.
From the perspective of supply and demand , Fawad Razaqzada, a senior analyst at GAIN Group, said that worries about weakening demand have begun to overcome worries about tight supply . A growing number of analysts are predicting that many major economies will slip into negative growth in the coming months, weighing on oil prices.
The probability of a U.S. recession in the next 12 months has soared to 38%, after consumer confidence hit a record low and interest rates soared, according to the latest forecast from Bloomberg Economics.
An earlier Wall Street News article pointed out that Citi analysts Francesco Martoccia and Ed Morse pointed out in the latest report that oil prices may fall to $65 per barrel by the end of the year due to the economic recession, and to $45 per barrel by the end of 2023 , which means oil prices will fall by 40% from current prices by the end of the year.
In general, the variables on the supply side still exist. Biden’s visit to Saudi Arabia in mid-July may help to increase supply; while demand is expected to weaken, the current negative feedback on demand has spread in the industrial chain, and gasoline prices consumption is in peak season under high oil prices in the United States. The sluggish phenomenon, the recovery of aviation kerosene consumption that the market was optimistic about before, was also less than expected due to the shortage of workers and bad weather.
However , previous articles from Wall Street News also pointed out that Saudi Arabia, the world’s largest oil exporter, raised the price of August crude oil for Asian buyers to a near record level on Tuesday. The increase in selling price means that the international crude oil market demand is still strong and supply is still strong. nervous.
From a technical point of view , oil prices in New York fell below the 100-day moving average on the 5th, and there are a large number of open put options exercised . In this case, commodity prices will accelerate their decline. Additionally, the sell-off came after Independence Day on July 4, and trading liquidity was at a seasonal low, exacerbating the sell-off on a technical level .
From a macro perspective , the recent strengthening of the us dollar has also made the commodity market “worse” and further pressured oil prices. The U.S. dollar index continued to climb, with the greenback surging to its highest level against the euro in nearly two decades. As fed policy expectations and risk aversion drive dollar buying, the dollar index broke through the 107 mark on Wednesday, hitting a new high since 2002, while the euro fell 0.8% against the dollar and fell below the 1.02 mark. When the U.S. dollar becomes more expensive against other countries, so does dollar-denominated commodity transactions.
In terms of news , Norwegian oil company Equinor said on the 6th that oil and gas production, which was affected by the strike by workers in the Norwegian oil and gas industry, will fully resume operations in the next few days.
Last weekend, JPMorgan Chase predicted that oil prices could double several times, while Citibank was the first to predict that oil prices would halve, and the long-short confrontation on Wall Street may have just begun.