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There are many difficulties! Why can't crude oil reach a new high?
Jul 7,2020 09:38CST
translation
Source:Citic Construction Investment Futures
The content below was translated by Tencent automatically for reference.

SMM News: macroeconomic data is good to boost oil prices, oil prices basically returned to March 6 high. However, in the short term, in the context of the rebound of the epidemic in the United States, the upward attack of oil prices has been hindered by the uncertainty of macroeconomic and oil demand prospects. If the epidemic situation in the United States does not improve significantly in the future, it will be more difficult for crude oil to break through the current high range.

Crude oil prices fluctuated higher last week, the first contract price of WTI remained in the range of 41.5 US dollars per barrel for the second week in a row, and the lower low was significantly higher than that in the first two weeks of June. Brent and SC crude oil prices also have similar characteristics. However, the rebound of the epidemic in some overseas regions has rekindled concerns about oil demand, resulting in oil prices not reaching record highs and increasing upward breakthrough pressure.

Non-agricultural data distortion in June

The labor department announced last Thursday that non-farm payrolls rose by 4.8 million in June, and the unemployment rate fell 2.2% to 11.1%. Despite the overall improvement in the report, the survey of employment data was conducted in the week of June 12, with a massive rebound in outbreaks in many states in the southern United States in mid-and late-decade. In the two to three weeks after the investigation, only 40 states in the United States showed an upward trend in new confirmed cases. as of June 30, at least 16 states in the United States had suspended or withdrawn their plans to reopen, which undoubtedly cast a shadow over the prospects of economic recovery. the intensification of the epidemic is not fully reflected in the latest non-farm data.

In addition, under the epidemic, many states in the United States cancelled Independence Day celebrations, but in some areas, celebrations were still held, and thousands of people gathered to celebrate. Infectious disease experts in the United States point out that the celebrations could lead to a surge in infection rates among participants and overwhelm the surrounding health care system. Some local people take the alert of "gathering to increase the probability of infection" lightly, and the consequence may be to slow down the prevention and control of the local epidemic and even the process of economic recovery.

High gasoline stocks in the United States

Us gasoline stocks rose 1.199 million barrels to 257 million barrels in the week ended June 26, close to a first-quarter high. According to the seasonal characteristics, US gasoline inventories usually begin to be de-stocked in February and March. After 3 months, the summer demand peak season is obvious, and the inventory reached the lowest point of the year in the fourth quarter. However, affected by the epidemic this year, the reduction in gasoline demand was greater than that in supply, resulting in gasoline depots returning to the year's high oscillation after a "V" rebound in March.

The cracked price gap between WTI and gasoline RBOB hit a nearly one-month high in the week ended June 26, boosting refineries' enthusiasm for gasoline production, but the recovery of gasoline demand was not as good as the increase in supply, which led to a drop in the center of gravity of the price gap last week. On the whole, high inventory will exert pressure on the oil price of finished products, thus increasing the pressure on the recovery of cracking spreads, which will be transmitted to refineries as profits are compressed, and the enthusiasm for starting work will be suppressed or dragged down the consumption of crude oil and the speed of destocking.

Conclusion

To sum up, the recent OPEC+ production cuts and US crude oil production have steadily supported oil prices, but the core momentum of the upward breakthrough mainly comes from the recovery on the demand side. At present, many countries around the world have been restarting the economy for some time, coupled with the positive macroeconomic data to boost oil prices, oil prices basically returned to March 6 high. However, there is obvious resistance near the first WTI line of about 42 US dollars per barrel and the main SC contract of 305 yuan per ton, because the uncertainty of macroeconomic and refined oil demand prospects in the context of the recent rebound in the US epidemic has hindered the upward attack of oil prices and increased pressure. Therefore, we expect that if the epidemic situation in the United States does not improve significantly in the future, it will be more difficult for crude oil to break through the current high range.

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