Recently, under the gradually intensified macroeconomic pressure of the Federal Reserve’s interest rate increase expectation, the oil price has fallen repeatedly. As of this Wednesday, according to the monitoring of the Business News Agency, WTI crude oil has achieved “six consecutive falls”, falling from the range of $80 to around $74, a drop of nearly 8%.

On Wednesday, crude oil futures fell again, falling more than 3% in a single day. The settlement price of the main contract of US WTI crude oil futures was 73.95 US dollars/barrel, down by 2.41 US dollars or 3.2%. The settlement price of the main contract of Brent crude oil futures was US $80.60/barrel, down US $2.45 or 3.2%.

The core logic of the recent decline in oil prices is still focused on the high inflation level in the United States. The strong economic data and the month-on-month higher inflation data in January make the expectation of the Federal Reserve’s aggressive interest rate increase continue to rise. On Wednesday, the Federal Reserve released the minutes of its first meeting in 2023. As soon as the news came out, the oil market fell sharply at the end of the day. The minutes show that the probability of further interest rate increases. The market expects the Federal Reserve to raise interest rates by 25 basis points in March and May of this year, and the probability of continuing to raise interest rates by 25 basis points in June is more than 50%. Moreover, the stubbornness of inflation and the long-term trend will make the interest rate reduction at the end of the year disappear. This has put pressure on the price of risky assets such as crude oil.

In addition, the favorable performance of the market on geographical factors weakened. The conflict between Ukraine and Russia has lasted for a year, and the market is waiting for further development of the situation. The negotiation or escalation of the conflict remains to be further observed. Under this node, bulls tend to avoid risks. At present, the decline of Russian oil supply is not as expected. Even though the West has repeatedly imposed restrictions on Russian oil, the Russian oil export has become increasingly stable since the outbreak of the conflict, and the US oil output is close to 13 million barrels per day, as well as OPEC’s adherence to the previous policy and inaction, the supply side is generally empty in the near future.

On the demand side, both positive and negative factors exist. Western developed economies are suffering from inflation and are still in the expected path of economic recession. It is difficult for oil demand to improve in the medium and long term. It can also be seen from the EIA inventory data that the super accumulation of gasoline and refined oil makes market participants uneasy. In particular, the news of the release of crude oil reserves in the United States was also negative for the oil market. However, the market is generally optimistic about China’s demand growth. Prior to this, EIA, IEA and OPEC monthly reports have also raised the demand forecast for 2023, and the report is optimistic about the contribution value of China’s demand. In general, the demand side is mixed.

Future outlook: The crude oil analyst of Business News believes that the recent oil market is weak and the possibility of inertia bottoming out exists. In the medium term, the macro pressure of the Federal Reserve to raise interest rates is lingering, and demand expectations are difficult to improve. The supply side needs to focus on the trend of Ukraine * Russia * conflict * sudden. If the military * business * conflict * sudden expansion, the oil market may end the bottom and have the possibility of further upsurge.