In the first half of 2023, international crude oil fluctuated widely and showed an overall downward trend. According to the Commodity Market Analysis System of Business Society, WTI fell by 10.89%, while Brent crude oil fell by 10.72%. After May, the market volatility range narrowed and gradually bottomed out and stabilized. On the one hand, against the backdrop of slow decline in inflation levels in Europe and America, and the process of interest rate hikes far from over, the outlook for global demand is uncertain, and the risk of economic recession still exists. On the other hand, OPEC+, an oil producing country, is continuously deepening production cuts to limit supply in order to combat the decline in oil prices. In the game between the two, oil prices remain stagnant.
From January to February 2023, Brent crude oil fluctuated repeatedly around the $80-88 range. The market performance shows that supply is relatively stable, but the United States and the West are constrained by inflation, and weak demand limits the trend of oil prices.
In March, oil prices plummeted from high levels. The main reason was that the overseas banking crisis broke out one after another, and then with the restructuring of Silicon Valley Bank, UBS acquired Credit Suisse, the market sentiment eased, and oil prices rebounded and repaired.
In early April, the oil market experienced a concentrated and brief upward trend. The main reason was the unexpected reduction in OPEC+production, followed by a continued decline in crude oil due to weak US economic data and supply bearish effects of Russia's crude oil exports not substantially decreasing.
At the beginning of May, the U.S. banking crisis was once again fermented. Under the combined effect of the U.S. government's Debt limit problem and the financial industry's Liquidity risk caused by the high interest environment, the oil price dropped significantly, and Brent crude oil once broke through the previous low, approaching $70. Later, with the resolution of the Debt limit problem in the United States and the expected impact of OPEC+production reduction, oil prices ended falling, and maintained range volatility, which lasted until the end of June.
On the supply side, OPEC+production regulation policies in oil producing countries will continue to play a role in providing bottom support for oil prices. Meanwhile, with the support of Asian buyers, Russia's crude oil export volume has shown rigidity. Shale oil in the United States has remained stable. With limited capital expenditure, the future growth space may be limited.
On the demand side, the macroeconomic environment in the second half of the year may maintain pressure on risky assets. On the one hand, the Federal Reserve still has plans to continue raising interest rates, and on the other hand, European inflation is high, the process of the European Central Bank raising interest rates has not yet ended, and the risk of a global economic recession has not been lifted. The uncertainty on the demand side increases. It is expected that overseas demand will grow slowly in the second half of the year, but with the start of the economy and further space for infrastructure construction in China, coupled with the peak tourism consumption season, it will to some extent stimulate the diesel and aviation coal markets.
Overall, in the third quarter, due to the impact of the peak travel season in North America, gasoline consumption growth, and the possibility of China introducing more stimulus policies, the oil market may experience a restorative increase. Brent crude oil is expected to break through previous highs and rise above $90. The market may return to neutrality in the fourth quarter, mainly due to the risk of demand expectations, and the high interest rate environment brought about by the Federal Reserve's interest rate hike may lead the US economy into recession faster. Oil prices may seek downward space.
If you have any questions, please feel free to contact SunSirs with support@sunsirs.com.