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Oil prices flashed below the 58 line of defense, and short sellers started the "unparalleled mode"
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Hello everyone, today XM Forex will bring you "[XM Group]: Oil prices flashed below the 58 line of defense, and short sellers started the "unparalleled mode"". Hope this helps you! The original content is as follows:
This week (November 17th to November 22nd), the international crude oil market experienced a significant and deep correction, and ended dismally with a new one-month low on Friday. The main logic of the market has undergone a drastic switch: from previous concerns about supply disruptions, it quickly turned to panic about potential oversupply.
The core driving force of this change xmniubi.comes from Washington's suddenly accelerated geopolitical actions - the Russia-Ukraine peace agreement negotiations strongly promoted by US President Trump have greatly changed the market's expectations for the prospects of Russian crude oil supply. At the same time, the dollar index climbed to a half-year high and uncertainty about the Federal Reserve's monetary policy further curbed the appeal of risk assets. Crude oil bulls suffered heavy losses this week. WTI crude oil not only fell below the psychological level of $60, but also approached the $58 line. Brent crude oil also fell simultaneously. Although the market's risk aversion is strong, this risk aversion has not flowed to xmniubi.commodities. Instead, it is reflected in the pursuit of cash (USD).
Disk review: The decline is established, but the rebound is weak
Looking back at this week's market, international oil prices showed a "resistance-style decline" and then accelerated to break the position.
WTI crude oil (US crude oil): As of the close of Friday (November 22), the continuous contract of WTI crude oil closed at US$58.76/barrel, an intraday decline of 1.73%. From a weekly perspective, U.S. oil fell by 3.29% this week. Breaking down the daily trend, bears clearly dominate. Except for the temporary rise in the market due to technical correction on Tuesday, the remaining four trading days all closed with a negative line. Friday's decline was particularly critical, breaking through the lower edge of the previous shock range that had lasted several weeks and establishing a short-term downward trend.
Brent crude oil: As the global benchmark, Brent crude oil was not spared. It closed at $63.09 per barrel on Friday, down 1.05% on the day, and the cumulative weekly decline was 2.76%. The trend of Brent oil this week showed the characteristics of "first rising and then falling". The tentative rebound at the beginning of the week quickly died in the absence of fundamental support, and then followed the pace of U.S. oil and entered the downward channel.
Judging from the market sentiment, the amplification of trading volume is mainly concentrated in the second half of the week, showing that funds have obvious risk-avoiding behavior of leaving the market before the weekend. The fall of the $60 mark is a heavy technical blow to WTI crude oil, which not only means the collapse of short-term support, but may also trigger further short chasing in programmed trading.
In-depth analysis of core logic
This week’s drop in oil prices is not caused by a single factor, but the result of the reversal of geopolitical expectations, macro-financial pressure and the cloud of trade protectionism.
1. The double-edged sword of the "peace agreement": the specter of oversupply
The biggest "black swan" in the market this week is undoubtedly the strong intervention of the US White House in the situation between Russia and Ukraine. President Trump made it clear that Kyiv should accept the peace plan within a week. This ultimatum-style diplomatic approach directly reshaped the supply expectations of the crude oil market.
In the past three years, the market risk premium caused by geopolitical conflicts has been mainly based on the assumption that "Russian oil supply may be interrupted." However, as peace negotiations were put on the agenda, the market logic quickly reversed: if an agreement is reached, it means that the geo-risk premium will xmniubi.completely return to zero. What's more, investors generally expect that once the conflict ends, Russia - the world's second-largest crude oil producer after the United States - will fully unleash its fuel export capabilities.
Although new sanctions against Russian oil producers Rosneft and Lukoil are set to take effect on Friday, they have failed to boost oil prices. This reflects a profound market reality: investors believe that in the face of the "grand chess game of peace" promoted by Trump, existing sanctions may be marginalized or even gradually lifted as an agreement is reached. The market's concern is no longer that it cannot buy oil, but that the large-scale return of Russian oil will exacerbate the global oversupply situation.
In this context, Russian President Vladimir Putin's response on Friday - that the US plan can be used as a basis, but if Kiev refuses - retains the possibility of military action, but the market interprets it more as a game on the negotiating table rather than a signal of xmniubi.comprehensive escalation, so it has not effectively supported oil prices.
2. Trump’s trade stick and global demand anxiety
In addition to geopolitics, the Trump administration’s radical stance on trade policy is also an important straw that crushes oil prices. Currently, trade wars and tariff wars have become a hot topic in the global market. The high tariff barrier policy advocated by Trump is creating tension around the world.
The market is generally concerned that this kind of trade friction initiated unilaterally by the United StatesFriction will seriously undermine the stability of the global supply chain, thereby dragging down global economic growth. When trade barriers are high, demand for logistics and shipping will inevitably shrink, which poses a long-term and far-reaching negative impact on the demand side of crude oil. Although some countries may increase strategic reserves due to risk aversion, this short-term behavior cannot offset the demand gap caused by cooling global trade. It can be said that Trump’s trade policy is becoming the biggest source of uncertainty on the demand side of crude oil.
3. Suppression of the strong US dollar
In terms of financial attributes, the strong performance of the US dollar index is the direct driver of the decline in oil prices. This week, the dollar hit a six-month high against a basket of currencies.
For crude oil, a xmniubi.commodity priced in U.S. dollars, a stronger U.S. dollar has a natural suppressive effect. It has significantly increased the cost of imported crude oil for global buyers holding non-U.S. currencies, thereby inhibiting the willingness to purchase in the spot market. Especially in the context of sluggish global economic recovery and inflationary pressures that have not yet xmniubi.completely subsided, a strong US dollar is like a tightening noose, limiting the room for crude oil prices to rebound. In addition, the uncertainty of U.S. interest rate policy makes funds more inclined to return to high-interest assets in the United States, further draining liquidity from the xmniubi.commodity market.
Instant opinions of institutions and analysts
In response to this week’s xmniubi.complex and changeable market environment, Wall Street and global mainstream analysis institutions have expressed their opinions. Overall, institutional views are cautiously bearish, focusing on the revision of geopolitical expectations.
Deutsche Bank (DeutscheBank): The erosion of risk premiums
Deutsche Bank Managing Director Jim Reid keenly pointed out the turning point in market sentiment in this week's report. He believes that just when the market should have been worried about the effectiveness of sanctions on Russia's two largest oil xmniubi.companies, news about peace negotiations came at the right time, which played a key hedging role.
Reid pointed out: "The news about the negotiations has eased the oil market's concerns about Russian oil supply risks." His view reflects the mainstream mentality of institutional investors: in anticipation of the normalization of supply that may be brought about by the peace agreement, the market is rapidly stripping away the geopolitical risk premium previously included in oil prices.
Australia and New Zealand Banking Group (ANZ): A Game of Reality and Expectations
xmniubi.compared with the blind pessimism of the market, ANZ's analyst team maintains a calm skepticism. In a report to clients, they cautioned that while the vision of the peace agreement is good, the practical reality is fraught with difficulties.
ANZ Bank said: "An agreement is far from certain." They emphasized that Kyiv has repeatedly refuted Russia's demands, which means that although the market is currently trading "peace expectations", if the negotiations break down, oil prices may face a sharp correction rebound at any time. However, bearish sentiment currently prevails, with the market choosing to ignore the risk of failed negotiations for the time being.
xmniubi.comprehensive analyst views: The diminishing marginal utility of sanctions
Multiple energy sourcesIndependent market analysts believe that the market has begun to doubt whether the latest sanctions against Rosneft and Lukoil can have a substantial impact. In the context of peace negotiations, the intensity and duration of sanctions implementation have been questioned. If sanctions cannot effectively restrict Russia's exports, the global crude oil supply landscape will remain abundant, which is a fundamental negative for oil prices.
Looking at this week, the crude oil market has experienced a painful revaluation under the shadow of "Trump-style" geopolitical manipulation and trade protectionism. WTI crude oil fell below the key support level, which is not only a technical breakthrough, but also a vote of no confidence in the future supply and demand pattern. The Russia-Ukraine peace talks promoted by Washington have directly changed the market logic from "oil shortage" to "oil abundance". Russia's huge production capacity potential has become the sword of Damocles hanging above oil prices. The strong U.S. dollar and high interest rate environment, xmniubi.combined with concerns about trade frictions triggered by Trump, have blocked the room for oil price growth from both financial and physical demand. Prices hit a new January low, showing that bears have full control over the short-term situation.
Looking ahead to next week, the market will pay close attention to Kiev’s final response to Washington’s “one-week ultimatum”. If the peace agreement makes substantial progress, oil prices may face pressure to plummet further and find a new bottom; conversely, if negotiations break down, the return of the geo-risk premium may trigger a retaliatory rebound. In addition, investors need to be wary of subsequent trade policy trends in the United States. Any signal of an escalation in the tariff war may be the last straw that crushes demand. In such a highly volatile environment, remaining cautious and paying attention to sudden changes in policy will be the top priority for traders.
The above content is all about "[XM Group]: Oil prices flashed and broke through the 58 defense line, and short sellers started the "unparalleled mode"". It was carefully xmniubi.compiled and edited by the XM foreign exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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