Economic and financial factors dominate this round of oil price decline, and the future may maintain a downward range shock

On August 15, the price of WTI crude oil fell by more than 5%
at one point.
WTI crude oil prices have been fluctuating
around $90 for the past few days since falling below $90 in early August.

After the Ukraine crisis, oil prices soared, with WTI crude oil prices peaking at more than $130 per barrel
.
After maintaining a three-month high level of volatility, oil prices have fluctuated downward since mid-June, falling to pre-crisis
levels in Ukraine.

Experts believe that the current round of oil price decline is dominated by economic and financial factors, and oil supply shortage concerns have been fully digested
.
Looking ahead, if there are no new geopolitical variables, oil prices may remain range-bound
in the downside.

Economic and financial factors led the current round of oil price decline

"In terms of broad categories, the factors affecting oil prices are mainly economic, financial and geopolitical, and the current decline in oil prices is dominated by economic and financial factors
.
" Dong Xiucheng, executive dean of the Institute of International Business Strategy of the University of International Business and Economics, said
.

"The Fed's interest rate hike has led to an appreciation of the dollar, and the consequent decline in dollar-denominated commodity prices is one of
the financial factors for the decline in oil prices.
In addition, in the oil financial derivatives market, international financial institutions show a tendency to be bullish and bearish, and the bearish force is stronger at present
.
Dong Xiucheng said
.
Since the beginning of this year, the Fed has raised interest rates by 225 basis points, and the dollar index has risen all the way, briefly exceeding 109
in mid-July.

"The high oil prices in the early stage were mainly affected by the Ukraine crisis, and the sanctions imposed by Europe and the United States on Russian oil made the market worried about the gap in Russian oil supply and whether the new supply could fill the gap
.
" Guo Haitao, director of the Institute of Energy Economics and Finance at China University of Petroleum (Beijing), said that at that time, the global economic situation showed a post-epidemic recovery trend, and the outside world expected strong
oil demand.

According to the monthly report of the International Energy Agency, Russia's crude oil supply is higher than expected, and its oil products flow to Asian countries, easing upstream losses
caused by European and American sanctions.
Compared with before the Ukraine crisis, Russia's crude oil production capacity fell by only 310,000 b/d in July, and overall exports fell by 580,000 b/d
.
Combined with the measures of various countries to increase production, global oil supply reached its highest level since the outbreak in July
.

Dong Xiucheng said that from a geopolitical point of view, the sanctions imposed by Europe and the United States on Russia in the energy field are actually relatively relaxed
.
The pressure on the EU is very great, and the United States does not want oil prices to be too high, and Russian oil flows to Europe and the United States
through various means of circumventing sanctions.
"At present, the market is not too worried about the supply shortage
caused by geopolitics and energy games.
" Dong Xiucheng said
.

A number of factors have led to divergence in oil and gas prices

However, while oil prices fell from their highs, natural gas prices rose all the way, and the TTF benchmark Dutch natural gas front-month futures reached a new high
on August 11.
Russia's oil and gas exports are subject to sanctions, why are their price movements so different?

Analysts say this is related to
the underlying economic characteristics of oil and gas.
The oil market is very well run, and the mode of transportation is flexible, so there are more means to circumvent sanctions and replenish supply, and the impact of sanctions on Russian oil is small
.
In contrast, sanctions on Russian gas have created a supply gap
.

"Natural gas supply relies on two routes
: pipeline transportation and liquefied natural gas (LNG).
At present, Nord Stream 1, Russia's main pipeline to Europe, has only 20%
of the gas capacity last year.
Europe imported about 150 billion cubic meters of Russian pipeline gas last year, which will cause a shortfall
of nearly 120 billion cubic meters of pipeline gas at 20% flow.
Guo Haitao said that due to pipeline and gas source restrictions, this part of the gap was transferred to the LNG spot market, and the new demand accounted for about 20%
of the total global LNG imports last year.

The EU believes that by November 1 this year, the EU's overall natural gas reserves must reach more than 80% to ensure a safe winter
.
LNG spot supply is limited and cannot meet new demand in a short period of time, so prices are high
.

At the same time, natural gas is less substitutable than oil and has stronger
rigid demand.
"As far as gasoline is concerned, when the oil price is too high, people can choose to travel with new energy vehicles or reduce their driving
.
Natural gas is not easy to replace
in residential life and industrial production.
Guo Haitao said
.

In addition, the natural gas market is less mature and more complex
.
It has many long-term contracts, and in the current situation where the spot value is higher, there are also cases
where the supplier defaults and converts the long-term contract to spot.

The future may maintain a downward range shock

Looking forward to the future of oil prices, experts believe that in the current economic and financial background, if geopolitics maintains the status quo, oil prices will fluctuate
in the downward range.

One trader said that the crude oil supply side has lacked investment in the past 10 years and the current capacity utilization rate is high
.
"With the United States putting about 1 million barrels of oil reserves per day, inventories are relatively balanced
.
Otherwise, overall U.
S.
oil inventories remain low and decreasing
.
The trader said that bulls believe that the United States may stop dumping reserves after October, and Europe may face energy shortages
in winter.

"The bears believe that in the context of coping with climate issues, the current oil price is at a big turning point, and the switch from traditional vehicles to new energy vehicles can be seen that the development of new energy is relatively fast
.
" When oil prices reach above $100, there are a lot of long-term money willing to allocate shorts
.
The trader said that the bears believe that the tightest demand is over, after which there will be less and less
demand.

Dong Xiucheng believes that the biggest variable in the future is geopolitics
.
If geopolitics remains the status quo, oil prices will not fall or rise all the way, they will fluctuate in the range of $80 to $100, and the general trend is downward
.

Guo Haitao believes that the price of oil that has long been recognized by the market is between $60 and $80 per barrel, and the price of more than $100 is less sustainable, and oil prices will continue to decline
in the future.