International oil prices hit the "triple digits" and the bears are expected to have the upper hand in the future

Since June, international crude oil futures prices have risen to the next level, and the global crude oil benchmark - Brent crude oil futures price has recently approached $95 per barrel. As the supply and demand problems in the crude oil market continue to ferment, the call for oil prices to return to $100 per barrel is increasing. This week, Goldman Sachs, Citigroup, JPMorgan Chase and many other institutions have joined the "100 yuan oil price club".Industry insiders said that at present, international crude oil prices are still in an upward trend, but they have entered a high price range, and there will be increasing pressure above. In the context of high oil prices, it is recommended that downstream petrochemical enterprises actively use derivatives to hedge the operational risks of the spot market.

Oil prices continue to rise

In recent months, international crude oil prices have continued to rise. According to Wenhua financial data, as of September 21 (Thursday), the main Brent crude oil futures contract was at $91.7 per barrel, up more than 28% from the closing price of $71.2 per barrel at the end of May. The contract briefly touched $94.57 a barrel on Tuesday, the highest level since November 2022.The recent surge in international oil prices has been mainly driven by oil production cuts in Saudi Arabia and Russia. At a time when market supply concerns are intensifying, institutions are even more bullish on higher oil prices above $100 per barrel. On September 20, Goldman Sachs, known as the "commodity standard-bearer", raised its forecast for Brent crude oil prices over the next 12 months to $100/b from $93/b previously. Citigroup analyst Moss also said on Monday that the geopolitical situation coupled with technical trading "could push oil prices above $100 in a short period of time." JPMorgan Chase & Co. said oil prices could soar into triple digits if crude oil supply comes under more pressure, which could lead to near-stagnation in U.S. and other countries.In this regard, Gao Jian, a crude oil researcher at Shandong Qisheng Futures, told a reporter from China Securities Journal: "According to the current disk pattern of crude oil futures, the upward trend has not yet ended. At present, oil prices have risen above $90 per barrel, while the crude oil market is still in a tight supply pattern, global inventories are still declining, and the agency gives a relatively reasonable near-term price expectation of $100 per barrel. ”

Sui Xiaoying, chief petrochemical researcher at the Founder Mid-term Futures Research Institute, believes that whether oil prices can rise to $100 per barrel depends on many factors. "On the one hand, the sustainability and implementation of the 'OPEC +' production cuts, Saudi Arabia and Russia announced the extension of additional production cuts in early September, and the 'OPEC +' production cut policy will also continue until the end of next year, so the implementation of the production cuts of oil producers in the later period is the focus of attention. On the other hand, as oil prices rise, if inflation concerns increase again, it is not ruled out that further interest rate hikes in Europe and the United States before the end of the year will be ruled out, which will in turn restrict oil consumption and macroeconomic trends, which will hit market confidence. Sui Xiaoying believes that there is still uncertainty about whether oil prices can rise to $100 per barrel.

Most of the rally has been "priced"

Although there are differences in institutions on whether oil prices can break through $100 per barrel, they have a relatively unanimous view on the future performance - there is little room for further upside.From a macro point of view, Gao Jian believes that although the high inflation situation in Europe and the United States has eased, the inflationary pressure has not been completely lifted. Since crude oil prices continued to rise in July, inflation data in Europe and the United States have risen, and anti-inflationary pressures still exist. At the same time, oil prices fluctuate in the range of historical highs, which will also have a negative feedback impact on the risk appetite of financial markets and terminal demand. "Therefore, although the current upward trend in oil prices has not completely ended, it has entered a high price range, and there will be increasing pressure above." Gao Jian said.Goldman Sachs also said that although oil prices are just around the corner to enter the "triple digits", it also means that most of the rally is "over", citing that oil producers are unlikely to push oil prices to extreme levels, which will undermine the industry's long-term residual demand.

Judging from the long and short positions of institutions, the bullish sentiment in the market has been increasing recently due to the continuous production cuts of oil-producing countries. Sui Xiaoying said that judging from the CFTC (U.S. Commodity Futures Commission) position data, the net long position of European and American crude oil has increased continuously in the past three weeks, the net long position of WTI crude oil has risen to a new high since April this year, and the net long position of Brent crude oil has risen to a new high since May this year, and the long-short ratio of non-commercial positions has also rebounded at a significant low level. At present, due to the obvious contraction of crude oil supply, it continues to boost the confidence of market bulls, but if the macro risks intensify in the later stage, it may hit the market's bullish confidence."At present, the short position of crude oil futures funds has fallen to an absolute low level, and there may be two situations in the future adjustment of crude oil futures position structure: fund long position reduction or fund short position increase, but in either case, for crude oil futures market, it will cause potential technical downside risks." Gao Jian said.

Manage risk with derivatives instruments

As the "king of commodities", crude oil prices remain high, which will also have a certain exemplary effect on the trend of other commodities.Gao Jian said that the continued rise in oil prices will drive up the prices of other commodities. At the same time, the prices of downstream products have also risen due to rising costs, especially gasoline and diesel, which are more correlated.

As far as the oil industry chain is concerned, crude oil, as the source of the petrochemical industry chain, is the raw material for most petrochemical varieties, and the rise in oil prices usually boosts the cost side of the petrochemical plate varieties. Sui Xiaoying said: "In recent months, driven by the continuous rise in oil prices, the overall price of domestic petrochemical varieties has risen, but the overall increase in petrochemical varieties is basically not as good as that of crude oil, so to a certain extent, it has increased the raw material cost of petrochemical enterprises and compressed the operating profits of enterprises. In this context, Sui Xiaoying suggested that petrochemical companies can actively use derivatives tools for risk management and hedge the operational risks of the spot market.

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