International oil prices continue to fluctuate at high levels

On September 13, the Federal Reserve announced the third round of quantitative easing monetary policy (QE3) and announced that it would purchase 40 billion U.S. dollars of agency support securities in the secondary market every month until the U.S. unemployment rate fell below 7%.

This news directly pushed up international oil prices. On September 14, the New York Mercantile Exchange's October delivery of light crude oil prices closed at $99 a barrel, the highest level since May 3 this year. The North Sea Brent crude oil price for November delivery closed at US$116.66 a barrel, the highest since May 2 this year. Although affected by profit taking by investors and softening oil demand outlook, on September 17th, New York and North Sea Brent oil prices both fell by more than 2%, but QE3 impact remained.

Market analysts believe that the actions adopted by the Fed in this form are roughly the same as the previous two rounds of quantitative easing monetary policy. The difference is that QE3 does not have an upper limit and no deadline. This means that QE3 will continue to influence the international oil price trend for a period of time until the US labor market improves.

In addition, due to QE3, the U.S. dollar fell against most currencies, falling to a four-month low against the euro and falling to a seven-month low against the yen. The weaker dollar exacerbated the gains of commodities, such as crude oil, which were priced in dollars.

The high international oil price shocks also have the continuing influence of geopolitics. Western countries’ sanctions against Iran have prevented the country’s oil from entering the market, triggering concerns that the potential supply has been blocked. The tensions in the Middle East have also caused the market to worry about providing strong support for the continued high international oil prices.

In terms of crude oil supply, although the previous hurricane and North Sea crude oil production had a certain impact, their influence began to weaken. According to a report on the Russian Independent Network on September 12, OPEC expects Russia’s oil production this year to increase by 10,000 barrels per day to 10.35 million barrels per day. In addition, the Ministry of Economic Development and Trade of Kazakhstan announced that it plans to extract 82 million tons of oil in 2013 and plans to increase oil and condensate production to 90 million tons in 2015.

On the demand side, the US Energy Information Administration estimated on September 11th that crude oil demand in the United States will decline by 1.5% this year, a new low in 15 years, but it does not rule out the possibility that QE3 will prompt US oil consumption to rebound. China’s sharp drop in crude oil imports in August also exacerbated speculation that the market’s demand for crude oil will decrease.

From the long-term perspective, the international oil price will continue to rise gradually under the background that the Fed will continue to release water. However, in the following period, the international oil price movement will have more severe fluctuations.