Crude oil: Tightening bearish constraints rebound, still a shock pattern

【Views and Suggestions】

On the evening of August 30, oil prices in the internal and external markets fell sharply, of which the external market fell by more than 5%, which was basically in line with our forecast
in yesterday's morning report.
On the surface, the lifting of martial law in Iraq eased the market's concerns about the shortage of Iraqi crude oil supply, but it is clear that the pullback of large assets last night is resonant, nonferrous metals and overseas stock markets have ushered in a sharp decline, and the market is still afraid of the Fed's interest rate hike expectations in September 75BP, as well as the downside risks
to the future economy under high inflation data.
In addition, the weakening of overseas refined oil products (especially gasoline) crack spreads and the accumulation of crude oil inventories still weaken OPEC or tighten supply
.
We believe that regardless of whether the negotiations on the Iranian nuclear agreement are finally completed, OPEC's supply-side expectations management that began last week may support oil prices in the medium term, in a long-term confrontation
with the return of Iranian crude oil and the bearish expectations of the Fed's interest rate hike.

From the perspective of the global crude oil market, after the two oil prices fell sharply by $30 / barrel since mid-June, the market bearish sentiment has weakened, and the game between the long and short sides in the current position has increased
.
On the one hand, the market is still afraid of the downside risk
of commodities under the interest rate hike cycle of overseas central banks.
Especially after Fed Chairman Powell gave another hawkish statement last Friday, this downside risk has increased; On the other hand, the market is worried that OPEC tightening supply will delay the upward trend of inventories, after all, the probability of a long-term sharp decline in the center of gravity of oil prices under the low inventory pattern is low
.

Therefore, in the future, the driving force of oil prices will switch from the middle and first half of the third quarter to the confrontation between macro bearish expectations such as overseas central bank tightening and recession in major economies to macro bearish and OPEC supply reduction expectations, and volatility may increase
significantly 。 Only for the rest of the third quarter, aside from the overseas central bank's interest rate hike path and OPEC's uncertainty on the supply side, subjectively our view is unchanged from the crude oil semi-annual report "Exploring Deterministic Arbitrage Opportunities in the Reshaped Oil Transportation Pattern--- Crude Oil Futures Market and Investment Outlook in the Second Half of 2022" released on June 26, that is, the downside risk in the third quarter still exists, and it is still necessary to be vigilant against the downside risk of oil prices in the process of formal bottoming, the core logic is: First, The downside risk of oil prices is often greater than the upside risk during the peak stage of overseas inflation; Second, globally, the marginal deterioration of the supply and demand side of crude oil itself is still continuing; Third, the dollar is temporarily strong
.
But if OPEC starts the tightening of the supply side as it said, oil prices cannot rule out ending the early reversal of the downside since June, which is also the biggest upside risk
in the near future.
It is recommended to continue to pay attention to the OPEC monthly meeting on September 5 and the upcoming US CPI data
for August on September 13.