Crude Oil Futures Market Roundup

International oil prices rebounded as traders assessed the potential improvement in the supply outlook and the impact of Western sanctions against Russia on oil supplies.

Friday (March 11) New York Commodity Futures Exchange West Texas light oil April 2022 futures settled at $109.33 per barrel, up $3.31, or 3.1%, from the previous trading day, with a trading range of $104.48-110.29; London Intercontinental Exchange Brent crude oil May 2022 futures settled at $112.67 per barrel, up $3.34, or 3.1%, from the previous up $3.34, or 3.1%, from the previous trading day, with a trading range of $107.13-113.91.

Oil futures traders are made up of investment banks, commercial users and merchants, with investment banks playing an important role in churning the market.

Recently, investment banks have been taking advantage of the news of tightening international relations to significantly increase their forecasts for international oil prices, yet there has been no significant change in market supply and demand, and even with Western sanctions on Russia and some traders waiting to see what happens as they import Russian crude, the physical market has not seen a significant imbalance between supply and demand.

In addition, unimplemented news is also stirring the oil futures market, with speculation that the UAE, Iraq or even a Middle Eastern country may increase crude oil production pushing international oil prices back down significantly from near record highs.

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As can be seen, the oil futures market was dominated by the news and saw significant ups and downs overnight. However, until oil futures are delivered, traders are only moving their investment funds.

The spot market is supposed to be influenced by supply and demand; if there is an abundance of supply, prices should be lower, and if there is a shortage of supply, prices should rise.

However, the spot market for oil is characterised by long transport distances and long arrival times, and therefore is not one handed and therefore subject to the influence on expected prices, with oil futures price volatility acting as an indicator of the spot market.

Geopolitical influences have led to a great deal of uncertainty in market supply and demand, resulting in crude oil futures in Europe and the US suddenly plunging this week after approaching all-time highs, the largest one-week drop since November last year, but still standing high above the uncharacteristic $100 per barrel.

Over the past week, first month futures for light, low sulphur crude oil on the New York Mercantile Exchange fell a net $6.35, or 5.49%; settling at an average price of $113.43 per barrel, $6.814 higher than the previous week, settling at a high of $123.7 per barrel and a low of $106.02 per barrel; trading in a range of $103.63-130.50 per barrel.

Brent crude oil first month futures on the Intercontinental Exchange in London fell a net $5.44, or 4.61%; settling at an average of $116.87 per barrel, $7.37 higher than the previous week, settling at a high of $127.98 per barrel and a low of $109.33 per barrel; trading range $105.70-$139.13 per barrel.

The market's focus remains on the supply side, and thus we take another estimate of the possible changes in supply in the global oil market. The West has imposed sanctions on Russia and the US has tried to join Europe and some other countries in embargoing Russian crude oil.

However, Europe mainly imports gas from Russia and does not have much demand for Russian crude, and the US imports a negligible amount of Russian crude. As long as other countries do not participate in the embargo on Russian crude oil and can break through the barriers of the international financial system, the impact of the supply of Russian crude oil on the international market is not so serious as to affect the rise in oil prices to more than $150 per barrel, and the claim that oil prices will rise to $300 per barrel is just a threat/threat.

It is estimated that the Western embargo on Russian crude oil could affect crude oil supplies by more than 2 million barrels per day. Although the absolute figure of over 2 million barrels per day is large, there have been frequent shortfalls of this magnitude in the last two decades, and they have not pushed the price of oil to such high levels.

For example, crude oil production in one South American country has been reduced from over 2 million barrels per day to 300,000-500,000 barrels per day on a number of occasions, such as the Libyan crude oil production which once dropped from over a million barrels per day to 200,000 barrels per day, and then there is the experience of a sharp drop in crude oil supply from one Middle Eastern country and Iraqi crude oil supply.

The aim of OPEC's production cuts is to curb the excessive collapse of oil prices, not to push them up to levels that affect consumption. OPEC's limits on crude oil production will therefore be adjusted to take into account the balance of the oil market, and although Russia plays an important role in the so-called OPCI+ cooperation, the OPCI+ is a group of common interests, not a political alliance, nor a It is not a political or power alliance. In the event of a serious imbalance in the oil market, OPEC and non-OPEC cooperation will break up and allow the oil market to rebalance.

The remaining OPEC production capacity, i.e. the capacity to resume production to the market, is close to 6 million barrels per day.