Approaching the $85 mark, can oil prices hold up?

The impact of the European energy crisis and the Russia-Ukraine conflict on the market has gradually drifted away, and oil prices have turned into a wide range of shocks, repeatedly oscillating between $80 and $90, which has significantly narrowed compared with the shock range in the previous three
quarters.
The news is facing the support of crude oil, but oil prices are completely different
from the news.

What are the current factors changing oil price expectations?

After OPEC announced production cuts in early October, Biden has successively introduced measures such as extending the release of the National Reserve, considering increasing taxes on oil companies, and considering banning the export of refined oil products this month
.
The near-term Russian supply is an important marginal variable
in the future global crude oil supply and demand balance.
With many details still unclear, it could be one of
the important factors in changing oil price expectations.

Global refineries are gradually resuming work from the autumn inspection, the operating rate will continue to increase, the EU sanctions on Russian oil are about to take effect, the future Russian oil exports will face greater uncertainty, does not rule out that Russia needs to reduce production in the future to balance exports, so from the fundamental and geopolitical level does not support a sharp decline in oil prices, the recent oil price fluctuations or mainly from macro and capital impact
.

The U.
S.
and its allies have refined the details of sanctions that set a price cap on Russian oil, and each shipment of seaborne Russian oil will only be subject to a price cap when it is first sold to a buyer on land, meaning that the resale of the same oil will not have to be capped at the same time
.

The latest data from the U.
S.
Energy Information Administration shows that in the week ended November 4, U.
S.
crude inventories rose 3.
925 million barrels to 440.
8 million barrels, up 1.
36 million barrels expected from 3.
115 million barrels in the previous month, gasoline inventories decreased by 899,000 barrels, the lowest level since November 2014, down 1.
08 million barrels expected and 1.
257 million barrels in the previous month, and refined oil inventories decreased by 521,000 barrels to their lowest level since December 2020, compared with an expected decrease of 800,000 barrels and an increase of 427,000 barrels
in the previous month.

OPEC expects world crude demand to reach 103 million b/d by 2023, up 1.
4 million b/d from last year's forecast and 2.
7 million b/d
from 2022.
Citi revised its oil price forecast for the fourth quarter of this year and the first quarter of next year, expecting the average price of Brent crude oil to reach $97/barrel in the fourth quarter of 2022 and fall to $88/barrel
by 2023.

The market's forecast for future oil prices

James Whistler, managing director of Singapore's Vanir Global Markets Pte, said: "Oil market prices are expected to continue to rise
as EU sanctions against Russia come into effect on December 5 and OPEC+ plans to cut production by 2 million barrels per day begin.
”

Jinlianchuang said that the market expects that the pace of interest rate hikes by the Fed may slow to 50 points after entering December, coupled with data showing that the GDP growth of the United States in the third quarter exceeded market expectations, investors' concerns about the outlook for energy demand have eased, and international oil prices have been supported
positively.
At the same time, after entering November, OPEC+ officially implemented the production reduction plan, OPEC+ will cut production by 2 million b/d in November and December, and the prospect of tighter supply has boosted oil prices
.
Later in the week, Saudi Arabia said Iran was preparing to attack Saudi Arabia and Iraq, and geopolitical uncertainty raised the risk of energy supply shortages
.

An effective tool for managing the risk of oil price volatility

In terms of operation, you can pay attention to the opportunity of CME Micro WTI crude oil futures (product code: MCL) to sell highs, and the option contract is mainly
based on the bear market spread strategy.
Year-to-date, micro WTI crude oil futures traded 127,000 lots per day, with a record average of 87,000 open interest in September
.
MCL has been adopted by traders across the globe, with nearly 40% of trading volume taking place
during non-US hours.

In June 2022, CME Group launched Micro WTI Crude Oil Options, offering monthly (MCO) and Friday (MW1-MW5) expiring contracts, allowing different traders to participate in the world's most liquid crude oil options market
.
Micro WTI crude oil options trading volume increased 34% year-over-year to a record 5,500 contracts
per day.
Average open interest also reached a record 11,300 contracts (see chart below), representing 21% of total volume during non-US time sessions, a record high
.