Why did the international oil price suddenly fall below the $100 mark?

Recently, international oil prices have suffered heavy declines
.

Light crude futures for August delivery fell below the $100 mark on the New York Mercantile Exchange on July 5, closing at $99.
50 a barrel, while London Brent crude futures for September delivery fell to $102.
77 a barrel
.
Both oils fell by more than 10%
in the day.

Light crude futures for August delivery fell $0.
97, or 0.
97%, to settle at $98.
53 a barrel on the New York Mercantile Exchange on July 6; London Brent crude futures for September delivery fell $2.
08, or 2.
02%, to settle at $100.
69 a barrel
.

Compared with the closing high on March 8 this year, the price of the first contract of New York crude oil futures fell by 20.
35%, and the first contract of Brent crude oil futures fell by 21.
32%, both of which fell into a bear market
.

Why did international oil prices suddenly plummet?

The industry believes that the recent fluctuation of international oil prices is affected by the contradiction between supply and demand, and there is a contradiction between the recovery of global crude oil demand and the limited growth of crude oil supply; On the other hand, monetary policy and expectations of a global recession have further weighed on demand
for crude oil.

Robert Yawger, head of Mizuho Energy Futures, said that Russian oil supply is still tight, but international oil prices are still being hit, and the only thing that can explain this is the market's fear of a global recession, and the fear that a global recession will reduce crude oil demand
.

On July 5, local time, the Bank of England warned that the outlook for the UK and the global economy has "seriously deteriorated"
.
Energy and fuel costs are rising rapidly around the world, making the cost of living generally rising faster
.

At the same time, energy tensions have exacerbated market unease
.
Since the beginning of 2021, European gas prices have reportedly risen by about 700%.

The latest quarterly report on the gas market released by the International Energy Agency shows that global gas consumption will decline slightly this year and slowly increase
in the following years due to soaring prices and the possibility of further supply reductions from Russian gas.

The British Centre for Economic and Business Research recently released a report that the risk of recession in Europe has risen sharply because of the reduction in Russian gas supplies, and the probability of a recession in Europe this winter has reached 40%.

However, the analysis believes that although the current oil price has experienced some ups and downs, the high operation is difficult to change
.
At present, it is the peak season of global crude oil consumption, and demand will gradually rise; In the long run, the tight supply of crude oil will still intensify, and the probability of a sustained plunge in oil prices is unlikely, and it is expected to recover lost ground
without waiting for a long time.

Global economic expectations are not optimistic

In fact, given the repeated impact of the pandemic and geopolitical tensions, the risk of a global market recession has long been apparent
.

Since the beginning of this year, problems such as rising global inflation, falling real wages, energy crisis, and food shortage have continued to emerge.

To this end, the United Nations, the International Monetary Fund (IMF), the World Bank, the OECD and others have all lowered their global economic growth forecasts in their latest forecasts
.

Growth expectations for several economies have also undergone revaluation
.
The IMF recently sharply cut its U.
S.
economic growth forecasts
.
The IMF said it now expects U.
S.
GDP to grow 2.
9 percent in 2022, down from its 3.
7 percent forecast
in April.
The IMF also lowered its U.
S.
economic growth forecast for 2023 to 1.
7 percent from 2.
3 percent and expects U.
S.
growth to be as low as 0.
8 percent
in 2024.

According to a research report released by Nomura Holdings, in addition to the United States, the euro area, the United Kingdom, Japan, South Korea, Australia and Canada are also expected to fall into recession
.

France lowered its GDP growth target for 2022 to 2.
5%, compared with 4%
expected in the previous budget.

The Institute for Macroeconomic and Economic Situation (IMK) lowered its GDP growth forecast for 2022 from 2.
1% to 1.
9% and its growth forecast for 2023 from 3.
2% to 2.
6%.

As a result of the above, recession fears intensified, and demand for safe-haven assets contributed to the strengthening of the US dollar, and the US dollar index rose to a 20-year high
on the day.
Oil prices are under significant pressure
due to rising purchase costs and reduced investment attractiveness for commodities denominated in US dollars.

Domestic refined oil products are expected to face a third downward revision

The collapse of international oil prices may affect the performance of
domestic refined oil prices next week.

At present, China's refined oil prices are adjusted every 10 working days, and the next round of adjustment will be opened
at 24 o'clock on July 12.

As of today, the current round of adjustment cycle has passed the halfway, the domestic crude oil change rate is negative 1.
39%, and it is predicted to fall by 75 yuan / ton, which is converted to 0.
06 yuan / liter -0.
07 yuan / liter
.

Industry insiders predict that if international oil prices continue to fall, then in the next price adjustment window (July 12), domestic refined oil prices are expected to be lowered for the third time this year
.