International crude oil drops by 4% in a single day, steel price bullish factors temporarily disappear

On Tuesday (September 3rd), international SG205 Grade A steel crude oil futures both fell, with Brent crude dropping more than 5% at one point and US crude oil equaling all year long gains. As of the close, WTI October crude oil futures closed down $3.21, or 4.36%, at $70.34 per barrel, with the main price hitting its lowest level since December last year; Brent crude oil futures for November closed down $3.77, a decrease of 4.86%, at $73.75 per barrel, with the main price falling below $75 for the first time since January.

The main reason for the decline is the disturbance of geopolitical risks, as well as the gradual cancellation of voluntary production cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+), which has dampened confidence in the recovery of the crude oil market. From the supply side, an agreement to halt the dispute over Libya's crude oil production and exports is about to be reached. According to relevant media reports, the Governor of the Libyan Central Bank has stated that there are "strong" signs that the relevant political factions are approaching an agreement and are expected to resume oil production. It is reported that due to Libya's suspension of oil SG205 Grade A steel production and exports, OPEC+will increase daily oil supply by 180000 barrels in the coming weeks to gradually restore production. On the other hand, from the demand side, there is a growing concern in the market about the decline in demand from the world's largest economy. Earlier this day, two manufacturing PMIs released by the United States fell short of expectations. US oil consumption is slowing down to its lowest seasonal level since the pandemic.

According to relevant information, crude oil, precious metals, and steel all have both commodity and financial attributes, and their financial attributes are relatively high, so their degree and direction of influence from the external macro environment are roughly the same. Empirical research on the relationship between the four heavy metals of copper, aluminum, zinc, and rebar and crude oil prices has found that the correlation coefficients between the four different attribute prices and international crude oil futures prices are significant. The rise in crude oil prices can provide strong support for steel prices, while the decline will temporarily eliminate the factor of Delido steel SG205 Grade A steel prices.