In the past weekend, two breaking news swept the circle of investment, causing the hearts of countless warehousekeepers to hang up:
On the one hand, the rumours that mei was close to reaching an agreement stormed the market, with massive dives in the international crude oil plate, with a cumulative decline of 6. 7 per cent in wti crude oil and 5. 2 per cent in brent crude oil within a week
On the other hand, there was a coal mine safety accident in changjio, shanxi, and the expected rapid warming of tight production controls。
Both things appear unrelated, with the underlying logic of the core of commodity investment: all short-term news, and price volatility resulting from rhetoric, will eventually turn back to the basic supply and demand patterns. Unnecessary losses in fluctuations can easily be sustained if emotionally driven to the nose。
Crude oil dives: only pulse fluctuations of geo-accusations, with no reversal of the core trend in the tight balance of supply and demand
In essence, the crude oil cliff jumps are only short-term reversals of the risk premium caused by geo-accelerations, far from trend reversals。
In the early hours of 22 may, after the arab media released news of the “final draft of the us-iraq agreement”, brent's short-line crude oil fell directly by $100 per barrel, with a minimum of $98. 5, with the largest drop of more than 4 per cent in the wti crude drive。
But only 24 hours later, the core differences between the two sides were put on the table: iran, while revealing that the united states programme included a phased lifting of sanctions, insisted that iran surrender all highly enriched uranium — this is precisely the core red line that iran will never yield to。
So far, the so-called agreement has remained at the level of verbal rumours, and the muscat negotiations at the end of the month are the real test, and there is great uncertainty as to whether they will eventually land。
A step back, even if the subsequent agreement were to land, it would not fundamentally change the current pattern of tightly balanced supply and demand of crude oil:
As at 23 may, wti crude oil had rebounded to us$ 96. 6 per barrel, and the strong support level of us$ 90 per barrel had not been effectively broken。
Rewinding history, oil price volatility due to geo-related events has always been pulsed: the palestinian-israeli conflict broke out in 2023, with oil prices rising by 12 per cent a week, and in less than half a month, the oil price rose to $139 in 2022, the highest since 2008, before rapidly returning to the basics of supply and demand. Ordinary investors can easily miss the rhythm if they follow the news。
Coal mine accidents: solid supply contractions are expected to gradually transfer to coal prices and coal-chemical industrial chains
Unlike the anecdotally driven fluctuations in crude oil, the expected contraction of supplies as a result of safety incidents at the shanxi coal mine is a fundamental marginal change。
On 22 may, in the wake of a gas explosion in the tun chong chong mining mine in shanxi changjiang county, shanxi province announced the launch of a nationwide cordon-down safety inspection in the coal mine area, focusing on core sources of risk, such as chawas, ventilation and covert work。
In accordance with past regulatory practice, the next major nationwide inspection of the safe production of coal mines will be launched in parallel, and the production of high-risk mines will be closed down and the verification of excess production will directly contract the coal supply。
The certainty of this impact has long been proven by past cases: following the accident of 2021 in shanxi hyoyi coal mine, the province launched a special security operation, which resulted in a 5. 2 per cent decline in the production of coal in the western part of the country and a significant 18 per cent increase in the price of power coal in the country over a period of six months; after the accident in 2023 in aryan, mongolia, nationwide safety checks were rolled out simultaneously, and the production of the original coal in the main area declined for two months in a row。
Today, the coal industry itself is already in a state of supply constraint, and the accident is tantamount to adding support to a well-balanced supply and demand pattern:
The resonance between supply and demand will not only drive the recovery of powered coal and caloric coal prices, but will also be transmitted downwards along the industrial chain to the entire coal-chemical plate: around 80 per cent of the country's methanol production comes from coal, and single tons of methanol require 1. 6-1. 8 tons of coal (supplied coal + fuel coal), which has increased cumulatively by more than 45 per cent since april; more than 70 per cent of urea is used in coal-based processes, with the average urea price rising by 5. 3 per cent in the first quarter of this year, and the cost support of subsequent coal prices will be further demonstrated。
The essence of investment: making trend money, not to be upset by short-term news
Capital markets are never short of news, and there are news breaking and official statements that stir market sentiment every day. But what really keeps us on the investment track is never a game of short-term news, but a precision of the trends in supply and demand。
As in two cases, many people have seen crude oil jump into the field, neglecting the general trend of global stocks continuing to evaporate, and the loss of production, while others have seen coal mine accidents rising blindly, without taking into account the possibility of securing the policy’s bottoms and import marginal repairs。
Short-term news always brings only noise fluctuations in prices and only basic supply and demand patterns, the core anchor for determining the medium- and long-term direction of prices。
Rewinding the previous rounds of bulk commodity cycles, whether in coal cow city in 2021 or in crude oil in 2022, is essentially a constant widening of the supply-demand gap; and the subsequent fall in prices is a necessary consequence of the reversal of supply-demand patterns. All geo-conflicts, policy anecdotals and emergencies have only accelerated or slowed the pace of trends, and have never really changed them themselves。
For ordinary investors, the easiest pit to step on is to be caught in the mood by information that flies in the air every day: when you hear the good, you get in the field, and when you see the good, you leave, and eventually you lose the principal money in a series of highs and downs。
A truly sound investment path has always served its core logic of seeing the large trends in the balance of supply and demand in the industry, blocking short-term emotional fluctuations, rational layouts when markets are overly pessimistic, and departures when emotions are too hot。
After all, the news is always the noise of the market, and supply and demand are the fixed stars of prices. Maintaining the anchors on the basics will make it possible to move at a steady pace in the rise and fall of the market。
