Crude oil: still in the downside window

Over the past week, the center of gravity of oil prices has stabilized, but it has been volatile and unsmooth, and the performance has been slightly stronger than we expected
.
After the continued volatility of oil prices last week, the market's expected game of interest rate hikes before the July Fed FOMC meeting eased, and the European Central Bank's over-interest rate hikes led to a short-term correction in the US dollar and caused the valuation of large asset classes to repair
upward.
For the coming week, we still maintain a bearish judgment on oil prices, WTI, Brent or fall below $90 / barrel, SC or fall below 570 yuan / barrel, the core logic is as follows: First, before inflation peaks, the market's recession expectations for overseas economies will not change
.
Although major asset classes have ushered in varying degrees of repairing rebound in the past week after previous overshoots, the sharp decline in service industry data from overseas economies in July crossed with other macro indicators to confirm the slowdown
in economic momentum.
Considering that the current overseas CPI is still at a historically high level, the market's expectations for recession certainty may be difficult to reverse before the release of the new CPI data in the next three weeks; Second, the supply and demand side of refined oil products at home and abroad continues to deteriorate
.
On the one hand, the Asia-Pacific region has maintained its previous pattern
of oversupply.
Among them, the market estimates that China's cumulative exports of steam and diesel coal in August will be about 2.
3 million tons, continuing to provide a marginal increase
in the supply of refined oil products in the Asia-Pacific region.
Considering that the current growth rate of domestic fixed asset investment has not improved significantly, it may not be easy to see an improvement
in domestic demand for refined oil products before September.

In overseas markets, in the past week, the crack price differential between domestic and foreign refined oil products continued to weaken, continuing to confirm the early end
of the peak demand season.
From the perspective of global oil inventories, in addition to the European ARA region diesel inventories remain low, European gasoline inventories, North American gasoline and diesel inventories and Asia-Pacific gasoline and diesel inventories are in the process of
rapid accumulation.
Therefore, it is very far-fetched to explain the continuous contraction in refined oil profits since July by the decline in North American natural gas prices driving the central decline in power generation fuel prices, and the early arrival of the inventory inflection point is forcing the refinery consolidated gross profit to contract
rapidly.
Once the comprehensive gross profit of the refinery continues to shrink, it may drive the refineries in the northern hemisphere to reduce the negative in advance in the future, and directly drive the contraction of the primary processing demand for crude oil; Third, the probability of a strong dollar remains high
.
There is a certain uncertainty in this logic, and it is recommended to pay close attention to the Fed FOMC meeting
next week (July 28).

Looking forward to the second half of 2022, the overseas tightening cycle will accelerate, and there should not be too many doubts
about the risk of a trend peak in commodities.
After the continued low level of chemical profits in the first half of the year, the downward trend of non-ferrous metals since April and the sharp decline in black since June, crude oil was under greater
downward pressure on the plate rotation.
In addition, considering that the path of Russian crude oil flow to the Asia-Pacific region has been fully opened, the market may be suppressed by the marginal negative of Russian oil southward for a long time after the EU stops 90% of Russian crude oil imports before the end of the year, especially the seasonal peak season in the second half of the Asia-Pacific region may
be diluted.
Of course, the uncertainty of the crude oil market at both ends of supply and demand in the second half of the year is still high, and the strategy can focus on various arbitrage strategies, please refer to our crude oil semi-annual report released on June 26 "Exploring Deterministic Arbitrage Opportunities in the Reshaped Oil Transportation Pattern--- Crude Oil Futures Markets and Investment Outlook for the Second Half of 2022"
.