Recently, the continuous decline in international oil prices has attracted market attention.
On August 2nd, the WTI crude oil main contract fell 3%, hitting a new low in nearly two months; The main contract of Shanghai crude oil futures fell more than 5% in overnight trading, hitting a new low since February this year. Oil prices have fallen for four consecutive weeks, setting a record for the longest weekly decline of the year.
According to institutional analysts, the decline in oil prices is mainly due to market concerns about poor demand, as manufacturing activities in Asia, Europe, and the United States show signs of weakness, which may put pressure on oil consumption. Overall, the crude oil market is still experiencing significant fluctuations within a large range.
Demand is sluggish, oil prices have fallen for four consecutive weeks
Since early July, international oil prices have experienced a continuous decline.
Entering August, the decline in oil prices has shown an expanding trend. On August 1st, WTI crude oil prices plummeted by 2.17%; On August 2nd, the main WTI crude oil contract fell more than 3%, hitting a low of $72.97 per barrel and closing at $74.14 per barrel, hitting a new low in nearly two months; The main contract of Shanghai crude oil futures fell 5.22% on the night of August 2nd, to 555.6 yuan/barrel, hitting a new low since February this year.
Oil prices have been falling for four consecutive weeks, driven by weak growth in global demand.
On August 1st, data released by the US Department of Labor showed that in the week ending July 27th, the number of initial jobless claims in the United States reached 249000, the highest level since August 5th, 2023. Last week, the number of people applying for unemployment benefits in the United States surged, once again raising concerns about the possibility of the US economy falling into recession.
Guoxin Futures stated that concerns about the US economy have overshadowed the intense tensions in the Middle East, causing international oil prices to fall again. Manufacturing activity in the United States experienced its largest contraction in eight months in July, with accelerated declines in orders and output leading to the largest decline in employment in four years. Data released on August 1st in the United States showed that the Institute for Supply Management (ISM) Manufacturing Index fell 1.7 to 46.8, with a reading below 50 indicating a contraction in industry activity.
Data shows that due to weak demand from China and India, Asian crude oil imports in July fell to the lowest level in two years. Analysts have stated that signs of weak manufacturing activity in Asia, Europe, and the United States have increased the risk of a sluggish global economic recovery, which may put pressure on oil consumption.
On the evening of August 2nd, the US non farm payroll data was significantly lower than expected, further exacerbating market concerns about the US economy falling into recession. According to data released by the US Bureau of Labor Statistics, the non farm payroll in the United States increased by 114000 people in July, the lowest record since December 2020, significantly lower than market expectations of 175000 people; The US unemployment rate in July rose 0.2 percentage points from the previous month to 4.3%, setting a record high since October 2021 and exceeding expectations by 4.1%.
Geopolitical risks are heating up, and long and short emotions are intertwined
Due to the significant increase in geopolitical risks in the Middle East, investors' emotions are complex, and market long and short factors are intertwined.
On July 31st local time, Hamas leader Ismail Haniya was attacked and killed. Hamas indefinitely froze negotiations on ceasefire and personnel exchange agreements, sparking concerns in the market about a broader conflict in the Middle East.
After the news was released, it triggered a sharp rise in international oil prices, with a closing surge of 4.46% on the same day, reaching a high of 78.88 US dollars per barrel. Many industry insiders are concerned that if the conflict between Israel and Hamas spreads to the oil producing regions of the Middle East, there will be a substantial interruption in the region's crude oil supply.
Analysts from Fischer Global Energy Consulting have stated that the events of the past week have actually disrupted the ongoing Israel Hamas ceasefire negotiations and may bring the entire region closer to a full-scale conflict.
In addition, on August 1st, OPEC stated at the JMMC meeting that it will maintain its oil production policy unchanged and adhere to its initial plan of gradually releasing production starting from next quarter. The daily production in the fourth quarter will increase by about 540000 barrels, reiterating that the gradual cancellation of voluntary production cuts may be suspended or reversed.
Dongwu Futures analyst Xiao Yu said that due to OPEC+extending production cuts, oil prices have been supported below and the mainstream market view is focused on supply shortages in the second half of the year. It is expected that the trend in the early third quarter will be upward. However, the actual demand for crude oil may not meet expectations and non OPEC+countries may still increase production in the second half of the year, which severely limits the upward trend of oil prices and may lead to a repeat of the mistakes made in the second quarter.
Shen Enxian, Chief Strategist of Galaxy Futures, believes that overall, the crude oil market is still in a large range of fluctuations. If the price falls, OPEC+will not increase production, but if the price rises, OPEC+'s production plan will be executed.
In the long run, Brent crude oil is still operating within the range of 70-90 US dollars, and the price trend has converged. In the future, crude oil prices may still be in this volatile trend, so it is not advisable to excessively chase up and down in operations, "said Shen Enxian.