01, Selling at the Peak
In late February of this year, the conflict in Europe officially erupted, and subsequently, international crude oil prices once surged to over $130.
In late March, U.S. President Biden signed an order to release 180 million barrels of strategic reserve crude oil into the market. The market viewed this action as a bailout move to stabilize oil prices, but looking back now, it turns out to be a very successful commercial operation.
Now, after extensive data analysis, some American media have concluded that the average price of the crude oil previously released by the United States into the market reached $96.25, and the timing of the decision to release coincided with the time when this year's crude oil prices were at their highest.
Understanding this, the recent announcement by the United States to start replenishing strategic reserves can be seen as a new signal, perhaps suggesting that crude oil prices will bottom out and rebound in the near future.
02, Starting to Buy
Currently, the United States' reserve crude oil is down to only four hundred million barrels, setting a new low since the early 1980s.
The latest news indicates that Biden has decided to start replenishing stocks soon, with an initial purchase of three million barrels, and continuous purchases in the future. At that time, releasing 180 million barrels into the market helped oil prices to fall. Now, if 180 million barrels are to be repurchased, it is very likely to stimulate an increase in crude oil prices.
Investors in the international crude oil market generally believe that the continuous interest rate hikes by countries like Europe and America have led to a global economic downturn, resulting in a continuous decrease in demand for crude oil. However, they overlook the fact that I am starting to replenish stocks, which will be a strong support for crude oil demand.
Another factor supporting oil prices comes from the reduction in Russian crude oil production, but the exact amount is still unknown and will require waiting for the latest data published by Russian officials.However, the current restrictions on Russian crude oil have not yet come to a definitive end in December; they merely represent a comprehensive ban on the import of Russian seaborne crude oil. By next February, we will further prohibit the import of Russian refined oil products. At that time, we will observe the supply in the crude oil market again and may arrive at a clearer conclusion.
03, Follow the operation?
If we rely on the data provided by the American media, the average selling price of the oil previously released by the United States reached $96 per barrel. Therefore, repurchasing at $70 to $75 now is equivalent to the United States completing a successful high sell and low buy operation.
From this perspective, during the last round of continuously rising crude oil prices, the U.S. government quietly made a substantial profit, earning at least $4 billion by making more than $20 per barrel.
However, we need to note that even if the United States starts buying now, it is only the beginning. It will take a considerable amount of time to fully replenish 180 million barrels, and the U.S. government has not set a deadline.
On the contrary, the cycle of replenishing crude oil will be much longer than the cycle of releasing crude oil to the market before. Therefore, the average price at which the United States will buy crude oil in the future should be significantly lower than $70.
So, as an investor, even if you want to follow the U.S. government's operations, you will need to have more patience.
04, The Story of the Venerable Monk
In the field of investment and finance, there is a story like this: someone asked a very successful investor, who was a venerable monk, how he bought and sold.
As a result, the monk told the visitor that he was not investing, nor was his purpose to make money. He just hoped to help the suffering people.When he saw that everyone was desperately selling stocks and no one was willing to take up the shares, he took out money to buy stocks; when he saw that everyone wanted to buy stocks and there were not many shares for sale in the market, he sold the stocks he had previously.
Perhaps the same principle applies: when the United States sells crude oil in an attempt to save the market, it is the time when the price of crude oil is about to reach its peak; when the United States announces the need to replenish its crude oil reserves, it is the time when the market is about to hit bottom.