To The Moon

CME group special commentator Kou Jian

A new round of military conflict broke out between Israel and Palestine on October 7, local time, which gave a short-term boost to crude oil prices, which was quite different from the previous trend in less than 10 days from September 27 to October 6. At that time, the price of American oil (WTI) dropped sharply from the highest point of 95 US dollars this year to 81 US dollars, which shocked the world.

What caused the sharp drop in crude oil prices this time, and what will happen to crude oil prices next?

On September 27th, the price of US crude oil reached US $95, and the inflation in the United States remained high. The Federal Reserve went all out to raise interest rates, and claimed that the whole rate hike operation would not be completed until the end of next year.

High interest rates have begun to do harm to the real economy and people's lives in the United States. And high oil prices are one of the initiators of inflation. The actual intervention of the US government in oil prices was already in the pipeline at that time.

For the sake of geopolitical security space around itself, Saudi Arabia's foreign policy in international political relations has undergone subtle changes recently. The Saudi crown prince's recent conversations are proof of this.

China, the world's largest buyer of crude oil, is celebrating the National Day and Mid-Autumn Festival holidays in the absence of the most important buyers in the global spot crude oil market, which also exaggerates the sharp movement of crude oil prices in the short term.

On October 4th, the U.S. Energy Administration released gasoline inventory data that unexpectedly increased by 6.5 million barrels, which surprised Wall Street oil analysts. The frenzied selling of gasoline futures contracts (RB) led to the decline of crude oil and other refined oil products.

For these reasons, the price of crude oil snowballed wildly last week. The following question is: Although the Middle East conflict once boosted the crude oil price in the United States, how will the crude oil price continue from now on?

My personal opinion is that,We have seen the highest price of American oil this year, which is about $95 WTI 10 days ago.

The US oil market may be fluctuated above US $80, but after the correction is completed, it is very likely that it will fall below US $80 and reach the 200-day moving average of US crude oil of about US $77 (below).

Judging from the price movement of crude oil market in the past 10 days, today's crude oil derivatives market has become more complex, moving faster and moving in a wider range within the day.

At the time of the completion of the draft, there has been a bloody conflict in the Middle East that has not happened for many years.

This incident aggravated the fluctuation of crude oil prices, from the previous decline to the current rise.

CME group's crude oil products provided some effective hedging tools for the market at this time, so since last week, the trading volume has remained high: WTI crude oil futures (CL). The trading volume on Thursday and Friday exceeded 1.1 million contracts; Micro WTI crude oil futures (MCL) traded 156,000 contracts last Thursday, which was the highest trading day in the past few months; Crude oil options traded about 270,000 contracts last Thursday. Driven by the conflict in the Middle East over the weekend and the rising risk aversion in the market, the trading volume of CL futures monthly contracts opened this week (October 9) was strong, and as of 10:00 am Singapore Standard Time, more than 72,000 contracts had been traded.

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