Crude oil fundamentals continue to be suppressed

Since early November, the crude oil market has fallen sharply, briefly falling below the September low of $82.
44 per barrel for Brent
.
Pessimistic macro sentiment and the reality of weak downstream demand became the main factors
in the decline in crude oil prices.

The pace of domestic purchases has gradually slowed down

Recently, through the operating rate, it can be seen that although the domestic main refineries still maintain high operating due to export quota pressure, the operating rate this week fell slightly by 0.
5% to 77.
99% month-on-month, and the operating rate of Shandong Georefinery fell by 1.
37% to 65.
83%.

In terms of terminal demand, on November 19, the national freight flow level decreased by 2.
83% compared with the same period last month, and will enter the seasonal off-season; The average number of 7-day subway trips in nine major cities in China is still below the five-year range, and residents' willingness to travel remains weak
.
Therefore, although China's crude oil purchases increased in November, the pace of domestic crude oil purchases gradually slowed down with weak domestic demand that has not improved and the local refining load fell slightly, and imports are expected to decline in December, which is one of
the main factors that have dragged down oil prices due to pessimistic market sentiment recently.

Saudi Arabia's energy minister said this month that OPEC+ would be cautious
about oil production due to uncertainty in the global economy.
OPEC, as the "majority" of crude oil, will maintain production
cuts until the end of 2023.
According to the monthly report data of the three major institutions released last week, EIA-caliber OPEC production fell by 280,000 b/d month-on-month to 29.
35 million b/d in October; OPEC production fell 210,000 b/d month-on-month to 29.
49 million b/d in October, mainly from Saudi Arabia
.
IEA-caliber OPEC production fell 30,000 b/d to 29.
8 million b/d month-on-month
in October.

On the whole, OPEC+ led by Saudi Arabia has implemented production reduction plans, which has also effectively hedged the reduction in demand caused by China's weak demand to a certain extent, and OPEC+ production cuts will continue to effectively support crude oil prices
.

The Russian embargo remains unclear

Short-term expectations of lower Russian exports remain one of the main drivers of
crude oil's future movements.
The EU plans to ban seaborne crude imports from Russia from December 5 and the purchase of Russian oil products
from February 5 next year.
For now, both the U.
S.
and the U.
K.
have said the price cap will not apply to shipments loaded before Dec.
5 (unloaded before Jan.
19).

As a result, Russian oil loaded in Asia can still be transported to shore in early December this year, and countries such as India are actively purchasing Russian crude
oil loaded in December.

However, Kpler shipping data can still see that some refiners maintain a wait-and-see attitude towards EU shipping and insurance restrictions, and Russia's weekly exports have further declined
.
As of the week ended Nov.
14, Russian crude exports were 3.
979 million b/d (including exports to unknown destinations), down 694,000 b/d from last week, mainly due to falling imports from European countries such as Italy, France and Greece
.
If the details of the G7 Russian oil sanctions are introduced as scheduled on Wednesday, considering the change in trade flows to the export volume of the Asia-Pacific region, Russian crude oil will still face an export contraction of about 1 million barrels per day, and the crude oil market will face further tensions
.
However, if the EU's "embargo" attitude is no longer tough, and restrictions are eased, grace periods are increased and shipping terms are relaxed before the approval of Russia's oil price cap plan, the reduction of Russian oil exports will be less than market expectations, and even centralized procurement may occur
.
Therefore, it is difficult to clarify the situation of Russian crude oil trade before the end of December, and the final export landing is the factor
we focus on.

In summary, short-term crude oil fundamentals remain weak
against the backdrop of weak demand in China and uncertainty about the Russian embargo.
However, in the long run, with the landing of Russia's export embargo, coupled with the problem of insufficient spare capacity of OPEC+ in the future and the support of production cuts, the sharp downside of crude oil will be limited
.