On November 7th, international crude oil futures plummeted significantly. The settlement price of the main contract for WTI crude oil futures in the United States was $77.37 per barrel, a decrease of $3.45 or 4.3%. The settlement price of the main contract for Brent crude oil futures was $81.61 per barrel, a decrease of $3.57 or 4.2%. Oil prices have fallen to their lowest point in the past three months. The main reason is that the hawkish stance of the Federal Reserve has sparked demand concerns and eased supply tension.
Tuesday's speech by Federal Reserve officials sparked widespread market attention, thereby determining the future policy direction of the Federal Reserve. Federal Reserve Governor Christopher Waller and Minneapolis Fed Governor Neel Kashkar both delivered hawkish speeches aimed at expressing concerns about the current level of inflation in the United States and suggesting that the Federal Reserve may still raise interest rates in the future. Affected by this, the US dollar has risen, putting pressure on the prices of commodities such as crude oil and gold priced in US dollars.
According to market news, UBS analyst Giovanni Staunovo stated on Tuesday that the rebound in OPEC exports is putting pressure on oil prices. Due to the seasonal decline in internal demand in the Middle East region, its export share has increased. Data shows that OPEC crude oil exports have increased by about 1 million barrels per day since reaching a low point in August, which to some extent alleviated the pressure of supply tightening caused by the tense geopolitical situation in the Middle East in the market.
The US Energy Information Administration (EIA) released a report on Tuesday titled 'Short term Energy Outlook'. The report shows that the growth rate of US crude oil production this year will be slightly lower than previously predicted, while demand will decrease. The EIA report is concerned about the future demand outlook, which has become an important reason for dragging down oil prices. Specifically, the EIA's "Short Term Energy Outlook" has raised the estimated growth of global oil demand by 80,000 barrels per day in 2024 to 1.4 million barrels per day. However, in the monthly estimate, the agency lowered its 2023 oil demand growth estimate by 300,000 barrels per day to 1.46 million barrels per day.
On the demand side, China's economic demand has maintained a growth momentum, with strong growth in crude oil imports in October. Data shows that China imported 473 million tons of crude oil in October, an increase of 14.4% year-on-year. However, the contraction rate of total exports of goods and services was faster than expected. In October, China's exports reached 1.97 trillion RMB, a year-on-year decrease of 3.1%. This indicates that there is still uncertainty in the external environment, and the economic conditions of the main export markets in Europe and America are worrying, which will also affect China's economic prospects.
SunSirs crude oil analysts believe that the recent market has shown some weakness due to the tense geopolitical situation in the Middle East, and the supply of crude oil in the Middle East region has not been significantly affected in the short term. The market focus is gradually shifting to the weakening demand outlook that may be brought about by the Federal Reserve's interest rate hike. In the future, supply and demand are intertwined, and in the short term, there are many uncertain factors on the supply side. The situation in the Middle East still brings a supply premium to the market. At the same time, OPEC+'s Saudi Arabia and Russia continue to reduce production, and the supplier benefits have not yet been fully realized. But the demand side will suppress the positive effects of supply, and the supply risk premium will continue to be compressed in the future. The logic of crude oil trading is still a supply-demand game, and the market will continue to fluctuate.
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