Professional Manufacturer For Headset and Earphone Since 1997


Home > News > International News > International oil price has a .....
Contact us
Our location Add.: 3F., 1st Bldg., Wanxia Industrial Park, Shajing, Bao’an District, Shenzhen, China Contact information Email: Te...Contact Now
Hot Headphone


International oil price has a high probability of continuing weakness

International oil price has a high probability of continuing weakness
2018-11-28 19:37:30 Source: China Securities Journal Author

For nearly a month, international crude oil prices have experienced the same roller coaster market. On October 3, New York's light crude oil was almost 80 US dollars per barrel, and Brent crude oil was almost 90 US dollars per barrel. Both touched the high point since the global financial crisis. At that time, the market was full of voices and thought it would rise before the end of the year. Breaking $100/barrel. But then the price of oil began to fall. During the period, New York's light crude oil fell for 12 consecutive trading days, setting a record for the longest consecutive losing streak. It fell below the $60/barrel mark in one breath, showing signs of stabilization, and then successively plunged to 50 US dollars/barrel. Whether it is American oil or oil, it has fallen more than 30% since its high point and entered a technical bear market.

The dramatic change in oil prices in just over a month has been rare in history. The reason is mainly because geopolitical events lead to changes in supply expectations, and the factors that have slowed down the demand for crude oil due to the decline in global economic growth.
From the supply side, due to the continuous rise in oil prices, major oil exporting countries began to increase production share, Saudi Arabia and Russia have successively withdrawn from oil production, while the United States has experienced a sharp increase in production with shale oil technology, August this year. Has become the world's largest oil producer. But what really causes supply disturbance is geopolitical events.

However, supply is only a short-term disturbance of market sentiment, and the more important factor is the slowdown of demand. In early October, the IMF lowered its global economic growth forecast for this year and next year from 3.9% to 3.7% in the World Economic Outlook. This is the first time in the past two years. The IMF has clearly bearish growth in several major economies in 2019, with the US economic growth rate falling from 2.9% to 2.5% and the euro zone's economic growth rate falling from 2.9% to 1.9%. The economic growth rate dropped from 6.6% to 6.2%.
The IMF believes that the growth drivers brought about by the US tax cuts and rising import demand are weakening, the growth momentum of emerging economies is slowing, financial conditions are tightening, and the downside risks facing the global economy have risen. In late November, the OECD outlook report also believes that the global economic growth rate has reached a peak and will gradually weaken in the future. Due to the slowdown in trade growth and the reduction of supportive policies, it will be difficult to achieve a “soft landing”, so the global growth expectation next year will be The previous 3.7% was lowered to 3.5%.
The above two reports echoed the continued weakening of monthly indicators such as OECD leading indicators and JP Morgan Chase Global Manufacturing PMI this year, further aggravating market risk aversion. OPEC, EIA and IEA have recently lowered their forecasts for the growth of demand for crude oil in 2018 and 2019. As of the week of November 16, EIA crude oil inventories increased by 4.9 million barrels to 446.9 million barrels, greatly exceeding market expectations. The marginal slowdown in global economic growth has led to weaker demand for crude oil and continued increase in inventories, which has put oil prices under pressure. In fact, in addition to crude oil, prices of commodities including metals, coal, rubber, etc., have recently plummeted.
Whether the future oil price will bottom out will still need to be viewed from two aspects of supply. From the supply side, there are two important time nodes to focus on. The first is the OPEC Vienna Conference on December 6. If OPEC can reach a new consensus on production cuts, crude oil prices are expected to stabilize. However, as far as the current international situation is concerned, it is not difficult to reach a new production reduction agreement. The second is the exemption period for Iranian crude oil exports. Since the United States only granted 180 days of exemption to eight economies, the ultimate goal is to limit Iranian crude oil exports. If Iran’s crude oil exports contract sharply after the expiration of the exemption, oil prices are expected to bottom out.

From the demand side, the current global recovery resonance that began in early 2016 is nearing completion, and the downward pressure on the future will gradually increase. In the United States, due to the fiscal stimulus subsidy and the cumulative impact of interest rate hikes, economic power began to weaken. China was affected by multiple factors such as weak consumption growth, uncertain foreign trade factors and real estate regulation, and the growth rate slowed down. In addition to these two growth engines, Japan, Europe and major emerging economies have also weakened sharply in the near term, and the global economy is facing a new round of downturn, thus limiting oil price increases.
Therefore, in terms of comprehensive supply and demand factors, in the context of the global economic slowdown, unless OPEC limits production more than expected, or the United States continues to increase sanctions against Iran, the high probability of oil prices will continue to remain weak.
The direct impact of weaker oil prices is to lower industrial prices and inflation expectations, which in turn affects the pace of interest rate hikes. Take the United States as an example. In recent months, the price increase in the United States has obviously weakened. The year-on-year growth rate of CPI has dropped from 2.9% in June and July to 2.5% in October. The core CPI is from July. 2.4% fell back to 2.1%, close to the target level of 2%.
Recently, Federal Reserve Chairman Powell said that considering the US economy may face three major obstacles: global demand slowdown, fiscal stimulus subsidy and lag in interest rate hike, the pace of interest rate hike will slow down next year, and the Fed will rely more on economic data in the future. Real-time performance rather than expected to make decisions. The interest rate hike in December this year has basically been fully expected by the market. At that time, the federal funds rate will come to the level of 2.25-2.5%, which is very close to the 3% neutral interest rate target. It is expected that the rate hike will be lowered next year. 1-2 times.
For the Chinese economy, the sharp fall in crude oil prices will also weaken domestic prices. It is expected that the PPI will decline in the second half of this year, and the CPI will continue to fall. The inflation pressure will be significantly eased. In the context of steady growth has become the current major economic task, the low price environment and the slowdown in US interest rate hikes will significantly weaken the constraints of monetary policy, and the space for moderately loose policies will gradually open.