On Wednesday, Hong Kong oil stocks suffered heavy losses, with the sector plunging more than 5%. Among them, the three major oil companies led the decline, with CNOOC and PetroChina falling more than 5%, and Sinopec Corp falling more than 4%. This sector has been declining since the beginning of this month from its year-to-date high. Since July 5th, the cumulative decline has exceeded 10%.

In particular, due to factors such as the easing of tensions in the Middle East, weak demand, and the OPEC + plan to increase production, the trend of oil prices this time is affected. First, the marginal utility brought by the cooling of geopolitical conflicts. Regarding the Russia-Ukraine conflict, Ukrainian President Zelensky recently stated that Ukraine is preparing for the second peace summit, and will formulate a complete peace plan before the summit. The key is that Zelensky also said that he is considering inviting Russian representatives to attend the summit. Prior to this, Zelensky had said that Ukraine is preparing a comprehensive plan to end the conflict. Recently, a series of statements by Zelensky seemingly reflect a loosening of Ukraine's negotiating stance. As for the Israeli-Palestinian conflict, Biden announced a while ago that Israel and Hamas had agreed to a ceasefire framework proposed by the US. With the gradual easing of the situation in the Middle East, the risk of oil supply may also be greatly reduced. In addition, as the world's largest oil importing country, the decline in China's crude oil imports has driven oil prices weaker. According to data from the General Administration of Customs and the National Bureau of Statistics, China's crude oil imports decreased in June this year, a year-on-year decrease of 10.77%. From January to June, crude oil imports were 275.48 million tons, down 2.3% year-on-year. At the same time, the average shipment volume of Russian crude oil in the past four weeks has also dropped to the lowest level since January, which may indicate weak demand in other regions. It is worth mentioning that the OPEC+ oil output cut will soon be cancelled. Starting from October, the group plans to restore voluntary production cuts of 2.17 million barrels per day within 12 months. The Iraqi oil ministry said that the country will compensate for overproduction since early 2024 (increased production). Gradual production increases will also keep the global oil market balanced. The International Energy Agency predicts that due to the significant slowdown in demand growth for important crude oil consumer countries such as China and India, coupled with Russia and some OPEC+ member countries not following the production reduction pace, global oil inventories will stabilize from the fourth quarter. The US economy, presidential election, and monetary policy of the Federal Reserve also have a significant impact on oil price trends.

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International oil prices have continued to fall. On Tuesday, WTI August crude oil futures fell 1.4% to $ 80.76 per barrel; Brent September crude oil futures fell 1.32% to $ 83.73 per barrel. In the Asian market today, international oil prices are still hovering at a low level. As of press time, WTI crude oil fell by 0.25% to $ 80.56 per barrel, and ICE Brent crude oil fell by 0.24% to $ 83.53 per barrel.

International oil prices are still hovering at a low level during the Asian market today. As of the time of publication, WTI crude oil fell by 0.25% to $80.56 per barrel, and ICE Brent crude oil fell by 0.24% to $83.53 per barrel.

Factors affecting oil prices

The trend of oil prices this time is affected by multiple factors such as the easing of tensions in the Middle East, weak demand, and the OPEC + plan to increase production.

First, the marginal utility brought by the cooling of geopolitical conflicts. Regarding the Russia-Ukraine conflict, Ukrainian President Zelensky recently stated that Ukraine is preparing for the second peace summit, and will formulate a complete peace plan before the summit.

The key is that Zelensky also said that he is considering inviting Russian representatives to attend the summit.

Prior to this, Zelensky had said that Ukraine is preparing a comprehensive plan to end the conflict. Recently, a series of statements by Zelensky seemingly reflect a loosening of Ukraine's negotiating stance.

As for the Israeli-Palestinian conflict, Biden announced a while ago that Israel and Hamas had agreed to a ceasefire framework proposed by the US.

With the gradual easing of the situation in the Middle East, the risk of oil supply may also be greatly reduced.

In addition, as the world's largest oil importing country, the decline in China's crude oil imports has driven oil prices weaker.

According to data from the General Administration of Customs and the National Bureau of Statistics, China's crude oil imports decreased in June this year, a year-on-year decrease of 10.77%. From January to June, crude oil imports were 275.48 million tons, down 2.3% year-on-year.

At the same time, the average shipment volume of Russian crude oil in the past four weeks has also dropped to the lowest level since January, which may indicate weak demand in other regions.

It is worth mentioning that the OPEC+ oil output cut will soon be cancelled. Starting from October, the group plans to restore voluntary production cuts of 2.17 million barrels per day within 12 months. The Iraqi oil ministry said that the country will compensate for overproduction since early 2024 (increased production). Gradual production increases will also keep the global oil market balanced.

The International Energy Agency predicts that due to the significant slowdown in demand growth for important crude oil consumer countries such as China and India, coupled with Russia and some OPEC+ member countries not following the production reduction pace, global oil inventories will stabilize from the fourth quarter.

The US economy, presidential election, and monetary policy of the Federal Reserve also have a significant impact on oil price trends.

IEA predicts that due to the significant slowdown in demand growth for important crude oil consumer countries such as China and India, coupled with Russia and some OPEC + member countries not following the production reduction pace, global oil inventories will stabilize from the fourth quarter.

US economy, presidential election, and monetary policy of the Federal Reserve also have a significant impact on oil price trends.

Currently, the market's expectation of Trump winning the presidency again is rapidly increasing. This provides support for the US dollar, which in turn puts some pressure on oil prices.

According to the latest data from electionbettingodds, the probability of Trump becoming president again has increased to 67.4%.

Wall Street banks have differing opinions.

Overseas investment institutions, including JPMorgan, UBS and Citigroup, have significant differences in views on the future trend of oil prices.

JPMorgan and UBS expect that the crude oil futures price, currently around $84 per barrel, will rise to $90 per barrel by the end of this quarter due to the oil supply-demand deficit.

However, Citigroup predicts that the Brent oil price will peak this summer and then sharply fall to $60 per barrel in 2025.

Strategist Eric Lee expects a significant increase in global crude oil inventories next year.

"We do think that there is a little bit of tightness around the supplies for the whole summer so the pricing will stay around $80 to $85 for some time, but we do see the market getting a lot heavier from the second half of this year until 2025."

Looking ahead, Wuchan Zhongda Group Futures' Xie Wen believes that the three factors of geopolitical risks, OPEC+ production cuts and interest rate expectations still have a key impact on crude oil prices for the second half of this year.

She pointed out that geopolitical risks are currently probably a pulse response. Unlike the first half of the year, the U.S. election and the geopolitical landscape are closely related in the second half of the year, as is whether the Fed will cut interest rates.

Last weekend, former U.S. President Trump was attacked, and the market expects a high probability of Trump returning to the White House, so factors such as oil-related policy and continued high inflation are worth paying attention to. If there are no new stimuli, the short-term impact of geopolitics on oil prices will weaken.

Regarding Hong Kong-listed petroleum stocks, UBS still sees bullish prospects for the three national oil companies.

The bank also raised its profit forecasts for CNOOC from 2024 to 2026 by 8% to 12%, and for Sinopec and PetroChina by 0% to 4%.

CNOOC's target price has been raised from HKD 26.3 to HKD 31, PetroChina's target price has been raised from HKD 9.8 to HKD 10.7, while Sinopec's target price remains at HKD 6.6.