International crude oil futures plummeted, oil prices returned to the level before the war between Russia and Ukraine, and WTI crude oil hit a nearly 8-month low. The settlement price of the main contract of U.S. WTI crude oil futures was US$81.94/barrel, a decrease of US$4.94 or 5.7%; the settlement price of the main contract of Brent crude oil futures was US$88.00/barrel, a decrease of US$4.83 or 5.2%. In the context of global central banks raising interest rates to fight inflation, worries about economic recession have increased;
Recession fears return to market focus
As high inflation continues to heat up, the intensity and pace of interest rate hikes by central banks around the world are accelerating. Inflation levels in major European and American economies continued to soar. Federal Reserve Chairman Powell’s speech was also very hawkish, and the market generally expects that the probability of the Fed raising interest rates by 75 basis points in September is still very high.
The EU inflation performance is even more serious, the euro zone inflation rate rose to 9.1% in August, a record high again, and higher than market expectations. That has doubled the pressure on the European Central Bank to continue raising interest rates sharply at its monetary policy meeting on Thursday, today. Coincidentally,
The Bank of Canada raised interest rates by 0.75 basis point to a 14-year high, saying further increases in policy rates were needed to combat inflation. The recession, which the West has been hyping up to keep oil prices down, is becoming a reality as inflation soars and interest rate hikes sap demand.
In addition, the U.S. dollar has continued to strengthen due to the Fed’s interest rate hikes. At present, the U.S. dollar index has exceeded the 110 mark, hitting a 20-year high, which has reshaped the valuation of dollar-denominated commodities and put a lot of pressure on oil prices at the macro level. .
Bearish inventory data: U.S. crude oil inventories rose more than expected
U.S. crude and distillate inventories rose in the latest week, while gasoline inventories fell, data from the American Petroleum Institute (API) showed. U.S. crude oil inventories rose by about 3.6 million barrels in the week to Sept. 2, while gasoline inventories fell by about 836,000 barrels, while distillate inventories rose by about 1.8 million barrels. Analysts interviewed previously generally expected a slight decline in crude oil inventories. The unexpected increase in crude oil and refined oil inventories indicates that after the North American driving season, the risk of declining market demand will gradually be exposed.
Outlook
The crude oil analysts of the business community believe that the short-term market focus is mainly shifted to the level of economic recession. From the fundamentals of supply and demand, the current oil market is still tight, especially in the context of the “energy crisis” in Europe that continues to rise. In addition, after the European and American economies impose price ceilings on Russian oil, it will further aggravate the energy shortage in the EU, which will raise the price of crude oil in North America and Europe, and the oil price will not stay at a low level for too long. In the later period, in addition to the shrinking demand caused by the economic recession, there are also certain risks on the supply side. It is necessary to pay attention to the progress of the Iran nuclear negotiation. If the Iran nuclear agreement is implemented, and the recent return of Iranian oil to the international market, oil prices will still face pressure.