Last Friday, international crude oil futures experienced three consecutive declines. The settlement price of the main WTI crude oil futures contract in the United States was $72.28 per barrel, a decrease of $1.54 or 2.0%. The settlement price of the Brent crude oil futures main contract was $77.33 per barrel, a decrease of $1.37 or 1.7%. The weekly chart showed a significant decline, with WTI crude oil falling by 7.35% and Brent crude oil falling by 6.78%. Record the largest weekly decline since early October last year. The main reason is the bearish outlook for US interest rate cuts and the easing of geopolitical tensions in the Middle East.
The situation in the Middle East is unpredictable, and the "ceasefire agreement" interferes with the market
Previously, according to Reuters, there were reports citing Qatari officials claiming that Israel and Hamas are about to reach a ceasefire agreement and may release hostages. Although the news has not been confirmed, it has triggered short-term panic selling in the market, and the ceasefire is expected to increase crude oil supply, thereby suppressing oil prices. Subsequently, Qatar made it clear that the agreement had not yet been reached, and market expectations for a ceasefire agreement quickly cooled down. But the release of US employment data last Friday brought a new round of blow to oil prices.
US employment data exceeding expectations dragged down hopes for interest rate cuts
The US employment data released last Friday showed impressive performance, indicating that the US economy is still in an overheated state, and the hope of quickly entering a rate cutting cycle in the future is becoming slim. Federal Reserve Chairman Powell expressed a hawkish stance in his speech, with market participants assessing a decrease in the probability of a rate cut in March.
Specifically, data released on Friday showed an increase of 353,000 jobs in January, with an unemployment rate of 3.7%. Previously, the market generally expected 185,000 new jobs to be created in January, with an unemployment rate of 3.8%. The newly added jobs in the United States in January far exceeded expectations. This is also favorable for the US dollar, as it rose sharply against all major currencies. The strengthening of the US dollar has put pressure on the valuation of commodity crude oil.
OPEC+ oil producing countries have limited space for future production reduction and relocation
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) decided at a committee meeting this week to maintain the current production policy unchanged. This indicates that the organization will not have a larger scale of production reduction actions in the short term, and the future performance of crude oil supply will be stable. Compared to the slowdown in demand expectations caused by weak economic demand, the future crude oil supply may remain relatively loose. In addition, the market generally expects that OPEC+ will decide in March whether to extend the first quarter production reduction agreement implemented last year. If the agreement becomes loose, the medium-term crude oil supply pattern will also change, and oil prices may further pressure.
SunSirs crude oil analysts believe that the current market trading logic is still focused on the game between supply shortages caused by the Middle East and expectations of weak demand due to the global economic slowdown. In the short term, the market's long short tug of war is becoming increasingly fierce, so oil prices will intensify volatility, especially in the recent period when the banking industry in Europe and America has encountered problems again. The market should be cautious of the possibility of a banking crisis happening again.
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