Macro bearish triggers panic sell-off Oil prices plunged sharply

On Friday (June 17), the price of international crude oil futures fell sharply, falling more than $10 during the session
.
The main contract of U.
S.
WTI crude oil futures settled at $107.
99 per barrel, down $9.
60 or 8.
16%; The main contract for Brent crude futures settled at $113.
12 a barrel, down $6.
69 or 5.
58%.

The market is mainly affected by macro bearish factors, panic has led to a sharp drop in oil prices, and the market is generally worried that interest rate hikes by central banks in major economies may slow down the global economy, and energy demand is expected to
weaken.

Have oil prices peaked? Can it return to the upward channel in the short term?

The root cause of this round of oil price decline is also high global inflation
.
Inflation in the United States exceeded expectations in May, with the CPI soaring to 8.
6% year-on-year, and the Fed's 75 basis point interest rate hike also set a record
.
This has led to further heightened fears of a global recession, coupled with the uncertainty of the pandemic, and market expectations have changed
significantly.
The dollar soared again, risk assets sold off again, and stocks and commodities fell
widely.
Crude oil bore the brunt, already at a relatively high level in history, and with the supply tightness not turning, panic gave oil prices a heavy blow
.

Crude oil analysts believe that the current round of oil price decline is mainly the resonant impact of the general decline in the stock market and commodities, commodity prices are generally at historical highs, the market has a wind, a wide range of shock pullback is also inevitable
.
However, fundamentals in key areas such as crude oil and agricultural products have not been reversed, especially the tightening of supply due to the Russia-Ukraine war, so it is expected that it will take time
to peak or reverse the downward trend.

From the supply side, the OPEC and its allies (OPEC+) are still conservative in their current production increase policy, although OPEC+ said that it will respond to Biden's request to increase oil production, but considering the political turmoil in some member countries and the difficulty of increasing production, OPEC+ spare capacity is stretched
.
Moreover, Russian oil production is still declining, and the overall supply of the market will remain tight
in the future.

In addition, U.
S.
shale oil production has not increased as much as the market expected, with the latest EIA report showing that U.
S.
crude oil production reached 12 million b/d, which is still far from
the pre-pandemic high of 13 million b/d.
On the contrary, after the market in the United States opened the driving season, gasoline consumption increased sharply, power shortage heated up, last week US President Biden declared the country into an energy emergency, "power shortage" or trigger a new energy crisis
in the United States.

On the demand side, the market generally expects that the current short-term market demand is still strong
.
The U.
S.
summer driving season will still bring steady increments
to the oil market.
Gasoline prices have risen along with demand, and last week the White House held an emergency meeting on refinery capacity today, and the United States has been releasing about 7 million barrels of oil a week in an attempt to cool refined oil prices, but oil market inventories still show tight
supply.
In addition, the easing of the epidemic in Asia and the easing of restrictions will also lead to moderate demand growth
in the short term.
The uncertainty of demand lies in the medium to long term, and interest rate hikes by many central banks around the world put pressure
on remote demand.
This may weigh on
oil prices for a longer period of time.

Taken together, the oil price environment has become more complex, and the market may intensify volatility and amplitude
.
But without a shift in supply tightness expectations, oil prices are likely to continue to challenge previous highs
.