Crude oil supply and demand expectations weaken prices may come under pressure in the future

In the context of weakening oil market supply and demand expectations and continuous tightening of global liquidity, crude oil futures prices at home and abroad fell
from high levels last week.
Among them, the US WTI crude oil futures price fell 9.
62% in a single week, falling to $107.
80 / barrel; Brent crude oil futures fell 9.
06% weekly, falling back to around $110 / barrel; Although the domestic crude oil 2208 contract fell by 3.
40% last week, it also began to fall 5.
41% on Monday to 690 yuan / barrel
.

Europe and the United States accelerated the tightening of liquidity

In the past two years, the epidemic has slowed
the recovery of overseas supply.
This year, the Russia-Ukraine conflict has further raised energy prices, and with the previous loose monetary policy, global inflationary pressures have increased month by month, which has driven European and American central banks to start monetary normalization
.
It can be seen that the US CPI rose 8.
6% year-on-year in May, exceeding expectations that the Fed raised interest rates by 75 basis points in June and started to reduce its balance sheet, while hinting that the pace of future interest rate hikes will accelerate
.
Meanwhile, European inflation climbed to 8.
1% in May, forcing the ECB to plan a 25 basis point rate hike in July and halt net asset purchases
.

Although raising interest rates can alleviate the rising inflation dilemma in Europe and the United States to some extent, it will hurt the economy
.
Moreover, in the context of the epidemic has not stopped and the Russia-Ukraine conflict has intensified, the downward pressure on the global economy will become more and more prominent
.
The latest global economic outlook released by the International Monetary Fund shows that the direct and collateral impact of the geopolitical conflict between Russia and Ukraine on the economies of the two countries, coupled with the impact of global fiscal and monetary policy tightening pressures, lowered the global economic growth forecast for 2022 by 0.
8 percentage points to 3.
6%.

After 2023, global economic growth is expected to slow to about
3.
3%.
It can be seen that the arrival of the global interest rate hike cycle will increase
the downside risk to the global economy.

Consumption increments may be compressed

Expectations of slower global economic growth will undoubtedly weigh on the outlook for
oil consumption.
According to statistics, in the past 20 years, the correlation between global GDP and year-on-year growth in oil demand is as high as 0.
90
.
For every 1% increase in global GDP, oil demand will increase by 0.
5%.

Affected by this, since the second quarter, many energy institutions around the world have lowered their global oil consumption forecasts
for this year for two consecutive months.
Among them, the latest short-term energy outlook released by the US Energy Information Administration shows that global oil demand is forecast to average 99.
61 million b/d in 2022, up 2.
22 million b/d year-on-year and 190,000 b/d
lower than the April report.
The International Energy Agency believes that global oil demand growth will slow from 4.
4 million b/d in the first quarter of this year to 1.
9 million b/d in the second quarter and is expected to slow to 490,000 b/d
in the second half of this year.
As the economies of Europe and the United States turn from stagflation to recession, global economic growth is expected to slow down further, and the increase in crude oil demand faces the risk
of continuous compression.

Oil producing countries expand production efforts

Since the beginning of this year, rising high oil prices have made crude oil consuming countries led by the United States repeatedly urge OPEC+ to further increase production to stabilize oil prices, but oil producers still maintain the established rhythm
of capacity recovery.
In order to improve relations with Saudi Arabia and other oil-producing countries, the United States changed its previous strategy of pressuring Saudi Arabia to increase production, recognized Saudi Arabia's position and voice in the international energy market, and tried to obtain Saudi support
in the energy field through deeper demand docking.
OPEC+ producers also decided at their ministerial meeting in early June to advance the September increase to July and August, raising their month-on-month production increase target for July and August by 50% to 648,000 b/d
.
If producers deliver on their pledges to increase production, supply will return to pre-capacity cuts, when the tight supply advantage of the oil market will be significantly weakened
.

Based on the above analysis, persistent high inflation is forcing European and American countries to take monetary tightening measures, and the opening of the interest rate hike cycle and the emergence of a new epidemic have heated up global recession expectations, thereby inducing a weaker
outlook for crude oil demand.
At the same time, OPEC oil producers have expanded their efforts to increase production and accelerated the release of production capacity, which has weakened the advantage
of tight crude oil supply.
In the context of weakening oil market supply and demand expectations and tightening global liquidity, it is expected that international oil prices will come under pressure
in the future.