Oil Trading: Oil slip amid deadlock in OPEC+ talks

During the Asian session on Monday (July 12), U.S. crude oil hovered around 74.77. Oil prices rebounded following the overall financial market last Friday. New York crude oil futures recorded the biggest increase in a week on Friday, with a cumulative decline of 0.8% in a week. OPEC+ Alliance's future actions The uncertainty of the US dollar and the strength of the US dollar dragged down the performance of crude oil prices throughout the week, because the stronger US dollar made the attractiveness of dollar-denominated commodities less attractive.



In the day, we will focus on the speech of New York Fed President Williams, and US Treasury Secretary Yellen’s influence on the bullish factors of oil prices

Bullish factors affecting oil prices

[Four major U.S. stock indexes hit a record high, the market regains confidence in the global economy]
The U.S. stock market generally rose last Friday, and several major benchmark indexes set new record highs. Investors regained confidence in global economic growth. The S&P 500 index rose 1.1%, with a cumulative increase of 0.4% last week. 9 of the 11 sub-indexes rose. Real estate, non-consumer staples, and information technology led the gains in the Dow Jones Index, Nasdaq Composite Index and Nasdaq 100 The index closed at an all-time high on the same day as the S&P 500 Index for the second time this month.

Cyclical stocks such as finance and energy led the gains, but their gains for the whole week lagged behind the broader market. Due to the market's concerns about highly infectious COVID-19 mutant strains, the Nasdaq 100 index rose for the eighth consecutive week, setting a record since May 2019 The longest consecutive rise.

According to Leslie Thompson of Spectrum Management Group, “the market is still in an upward channel, and obviously there will be bumps along the way.” Many institutions including JPMorgan Asset Management, BlackRock and Morgan Stanley Wealth Management expect global economic growth. Still on track, the earnings release season beginning this week is expected to further boost market confidence. In its semi-annual monetary policy report, the Fed promised to maintain "strong" monetary policy support until the economy fully recovers.

[Increase in demand to support oil prices]
OPEC+ failed to reach an agreement to increase production last week, triggering panic about supply shortages and pushing oil prices to a six-year high earlier last week. With the peak summer driving season, fuel consumption in countries such as the United States, India, and China Are on the rise. U.S. crude oil inventories have fallen sharply, and refineries are approaching full production in order to meet demand.

Michael Tran, an analyst at Royal Bank of Canada Capital Markets, said, "We are now in an extremely strong mid-summer period, with U.S. inventories falling sharply, and we expect this to continue to support the market."

Peter McNally, Global Head of Industry, Materials and Energy at Third Bridge, said: "The world needs more oil and expects more oil, so despite the uncertainty of supply, demand is still growing."

Nissan Securities Research General Manager Hiroyuki Kikukawa said, “Despite the OPEC+ quarrel, some investors have turned bullish because there has not been any significant increase in shale oil production in the United States.”

Negative factors affecting oil prices

[Japan holds the Olympic Games without spectators]
According to data from the Japanese Ministry of Health, Labor and Welfare, on July 10, local time, there were 2,458 new confirmed cases of new crown in Japan and 15 new deaths. Japanese Prime Minister Yoshihide Suga said that the highly transmissible delta variant virus has led to the recent increase in the number of new crown cases in Tokyo.

According to a report from the Japan Broadcasting Association (NHK), on July 8, local time, the International Olympic Committee, the International Paralympic Committee, the Tokyo Olympic Organizing Committee, the Tokyo Metropolitan Government and the Japanese Government held a five-party consultation to formally decide the Tokyo Olympics Venue games are held in empty venues without spectators.

The Japan Times reported on July 10 that the Tokyo Olympic Games held in Fukushima will be changed to empty venues. According to breakinglatest statistics, during the Tokyo Olympics, only 26 time slots held in Miyagi, Ibaraki, and Shizuoka allow spectators to enter, accounting for about 3.5% of the total time slots. The Tokyo Olympic Organizing Committee stated that it had once again "confirmed its intention" with the three counties on the 10th, and there will be no further changes.

Chiyoki Chen, chief analyst at Sunward Trading, pointed out, “Due to the uncertainty of OPEC+ production after August, the market lacks a clear direction. He said, “The reduction in US crude oil inventories is a positive factor, but considering the new crown epidemic in the United States and other places. Reappear, this may be a temporary phenomenon. He added that the new anti-epidemic blockade may slow the recovery of air travel and aviation fuel demand.

[88 checkpoints in Bangkok, Thailand to severely punish violators of the "curfew"]
According to the anti-epidemic escalation measures previously announced by the Thai government, Bangkok will implement a "curfew" at 0:00 on the 12th, and prohibit people from going out from 21:00 to 4:00 the next day (except for obtaining a permit and having a good reason to go out). The person in charge of the Kyoto Police Department in Bangkok revealed on the 11th that 88 checkpoints have been set up in Bangkok and a rapid action team has been set up to strictly inspect vehicles and people traveling during the "curfew" period and impose penalties on those who violate the regulations. Violation of the "curfew" order will be punished by imprisonment for up to 2 years or a fine not exceeding 40,000 baht, or both. In addition, in accordance with the provisions of the "Infectious Diseases Law", violators will also be fined not more than 20,000 baht.

In response to the follow-up trend of the German epidemic, Frank Montgomery, chairman of the German World Medical Association, told German media that it is feasible to gradually "unblock" in a cautious manner, but it is necessary to pay close attention to the subsequent development of the epidemic. If there is a surge in new diagnoses, You must return to the state before "unblocking".

The delta strain has become the most infectious strain of the new coronavirus in the United States and has led to an increase in infection rates in many states. Data shows that the last time there were more than 20,000 new confirmed cases of new coronary pneumonia in a single day in the United States was in May this year. The US Centers for Disease Control and Prevention stated on the 8th that more than 9 million people in the United States live in counties with a continuous surge in cases and a vaccination rate of less than 40%, and these areas are also the places where the Delta strain is most infected.

Overall, the decline in inventories, insufficient demand, and the uncertainty of OPEC+'s future actions have become key factors in the rise of oil prices; however, with the rapid spread of mutant strains, worries have arisen, and countries have once again adopted lockdown measures to varying degrees, which will restrict restrictions. With the increase in oil prices, oil prices will continue to pay attention to OPEC+ related news in the short term.


GMT+8 08:03, U.S. crude oil is now quoted at US$74.73/barrel