Institutions: Recession drags down Oil prices plunged to near an eight-month low

On Wednesday (September 7), international crude oil futures plummeted, oil prices returned to pre-war levels between Russia and Ukraine, and WTI crude oil hit a nearly eight-month low
.
The main contract for U.
S.
WTI crude oil futures settled at $81.
94 / barrel, down $4.
94 or 5.
7%; The main Brent crude futures contract settled at $88.
00 a barrel, down $4.
83 or 5.
2%.

Under the background of global central banks raising interest rates to fight inflation, recession fears have intensified; In addition, China's crude oil imports fell sharply year-on-year in August, weighing on market confidence, and the control caused by repeated epidemics dragged down oil demand
.

Recession fears are back in the market's spotlight

As high inflation continues to heat up, the intensity and pace of interest rate hikes by central banks around the world are accelerating
.
Inflation in major economies in Europe and the United States continues to soar
.
Previously, Fed Chairman Powell's speech was also very hawkish, and the market widely expected that the probability of a 75 basis point rate hike by the Fed in September is still very high
.
Inflation in the European Union was even worse, with inflation in the eurozone rising to 9.
1% in August, again hitting a record high and higher than market expectations
.
This doubled
the pressure on the ECB to continue raising interest rates sharply at its monetary policy meeting on Thursday.
Coincidentally, the Bank of Canada on Wednesday raised interest rates by 0.
75 basis points to a 14-year high, saying policy rates needed to be raised further to fight inflation
.
As inflation soars and interest rate hikes weaken demand, the recession that the West has spared no effort to suppress oil prices is gradually becoming a reality
.

In addition, the Fed's interest rate hikes have continued to strengthen the dollar, and the dollar index has now broken through the 110 mark and hit a 20-year high, which has reshaped the valuation of dollar-denominated commodities and put a lot of pressure on
oil prices at the macro level.

Repeated regional epidemics remain a constraint on oil demand

At the moment of repeated epidemics, China's fuel demand is still relatively weak
.
This is evidenced by the sluggish import data: China's crude imports in August fell 9.
4 percent
from a year earlier, according to data released by Chinese customs on Wednesday.
On the one hand, since August, state-owned refineries have been overhauled, the operating rate has declined, and profit margins have continued to decline, once close to batch zero upside down
.
In addition, the reduction of local independent refineries has limited imports, especially the introduction of restrictions in many places, and gasoline demand has been generally suppressed
.
China's weak economic data and strict controls have added to demand concerns
.

Negative inventory data: U.
S.
crude oil inventories increased more than expected

Data released Wednesday by the American Petroleum Institute (API) showed U.
S.
crude and distillate inventories rose in the latest week, while gasoline inventories fell
.
U.
S.
crude inventories rose by about 3.
6 million barrels, gasoline inventories fell by about 836,000 barrels, and distillate inventories increased by about 1.
8 million barrels
in the week ended Sept.
2.
Previously, analysts surveyed generally expected crude oil inventories to decline slightly, and the larger-than-expected increase in crude oil and refined product inventories indicated that the risk of declining market demand would gradually be exposed
after the North American driving season.

Market outlook

Crude oil analysts believe that the short-term market focus has mainly shifted to the recession level
.
From the fundamentals of supply and demand, the current oil market is still tight, especially in the context
of the continued surge of the "energy crisis" in Europe.
In addition, after the implementation of the maximum price limit on Russian oil by European and American economies, it will further aggravate the energy shortage in the EU, which will raise the price of North American and European crude oil, and oil prices will not linger at low levels for too long
.
In the later stage, in addition to the demand contraction caused by the economic recession, there are also certain risks on the supply side, and it is necessary to pay attention to the progress of the Iranian nuclear negotiations
.