During the Asian session on Thursday (October 14), U.S. crude oil hovered at US$80.82 per barrel. API data released in the morning showed an increase in inventories. Oil prices continued to fluctuate on Wednesday. The cautious forecast of crude oil demand has led some traders to take profits.
In the day, we will focus on China’s September CPI annual rate, the number of initial claims for unemployment benefits in the United States as of October 9, the changes in EIA crude oil inventories in the United States as of October 8, the IEA’s monthly crude oil market report, and the speeches of many Federal Reserve officials.
Negative factors affecting oil prices
[U.S. crude oil inventories increase to help oil prices fall]
In the morning, the American Petroleum Institute (API) data said that US crude oil inventories increased last week, while gasoline and distillate inventories fell. Data show that as of the week of October 8, US crude oil inventories increased by 5.2 million barrels. Gasoline inventories fell by 4.6 million barrels, and distillate inventories fell by 2.7 million barrels.
In addition, data released on Wednesday by China, the world's largest crude oil importer, showed that crude oil imports in September fell 15% from the same period last year, and oil prices were under pressure.
[OPEC remains cautious about the strength of oil demand]
Although international crude oil prices exceeded US$80 per barrel for the first time in several years, the Organization of the Petroleum Exporting Countries (OPEC) is still cautious about the strength of oil demand. In its monthly market report, the organization lowered its forecast for global oil consumption this year and asked member countries to pay close attention to the market. Although soaring natural gas prices may increase oil use in areas such as power generation, it may also inhibit demand in other areas, such as oil refining.
The OPEC secretariat pointed out in the report that “supported by the demand for seasonal petrochemical products and heating fuels, as well as the potential shift in consumption from natural gas to oil, it has positive expectations for oil demand in the last quarter of this year.” However, earlier this year The actual consumption data at that time was weaker than expected. The report recommends that oil-producing countries “remain vigilant about market fundamentals.”
OPEC lowered its forecast for growth in global oil demand this year from the previous 5.96 million barrels per day to 5.8 million barrels. This change is due to the decline in oil consumption data in the first nine months of this year, but total demand in the fourth quarter was revised up by 120,000 barrels per day to 99.82 million barrels per day.
According to the report, record natural gas prices may cause consumers to switch to oil in certain industries, but this does not mean that oil demand will inevitably be boosted. OPEC said, “Benefiting from higher demand for power generation, refining and petrochemical products, fuel oil, diesel and naphtha may be supported. On the other hand, record natural gas prices have pushed up the cost of electricity, which in turn pushed up the cost of electricity. Refining operating costs. This may affect refinery processing volume and industrial output value, and partially offset the upside potential."
Bullish factors affecting oil prices
[Technology stocks lead the rise, CPI highlights inflationary pressures to boost companies that are easy to pass on costs]
US stocks closed higher on Wednesday, led by technology stocks. The Consumer Price Index (CPI) showed high inflation, boosting the stock prices of companies that are thought to be easier to pass on costs to consumers.
Traders also assessed the minutes of the Fed meeting. The minutes stated that Fed officials generally believed last month that even if the delta strain continues to pose a resistance to the economy, the Fed should begin to reduce monetary stimulus measures during the epidemic period from mid-November or mid-December. .
The Nasdaq 100 index, which has a relatively high technology stake, outperformed the main benchmark stock indexes, and the NYSE FANG+ index composed of giants such as Amazon and Google’s parent company Alphabet Inc. climbed about 1%. The S&P 500 index rebounded after falling for three consecutive days. Delta Air Lines led the decline in aviation stocks after the company warned that rising oil prices would threaten this quarter's results.
The US September CPI rose more than expected, highlighting inflationary pressures. The Biden administration tried to ease supply chain bottlenecks before the Christmas shopping season, but officials admitted that their options were limited.
Nancy Davis, founder of Quadratic Capital Management, said, “The CPI data released on Wednesday marked that high inflation has lasted for about six months. It is not as short-lived as many investors had previously expected. The shortage of labor has led to supply chain disruptions and rapid price increases, which have promoted Overall inflation."
[U.S. consumer prices rose more than expected in September]
The increase in consumer prices in the United States in September exceeded expectations, resuming the previous accelerated upward trend, highlighting the continued inflationary pressure facing the economy.
According to data released by the US Department of Labor on Wednesday, the consumer price index in September rose 0.4% from August. The year-on-year increase reached 5.4%, the largest year-on-year increase since 2008. Excluding volatile food and energy, core inflation rose 0.2% month-on-month.
Unprecedented shipping challenges, shortages of raw materials, high commodity prices and rising wages have all contributed to a sharp rise in producer costs. Many manufacturers passed part of the rising costs on to consumers, resulting in longer-lasting inflation than many economists had previously expected, including Fed economists.
Looking ahead, rising energy prices will further erode American salaries. Although wages have risen in recent months, rising consumer prices are eroding people's purchasing power. Another report released on Wednesday showed that the inflation-adjusted average hourly wage increased by 0.2% month-on-month in September, but fell by 0.8% year-on-year.
[U.S. crude oil production this year has fallen more than previously estimated]
The U.S. Energy Information Administration (EIA) said in its monthly report on Wednesday that the decline in U.S. crude oil production this year will exceed previous expectations, but it will rebound in 2022.
According to EIA, US crude oil production will fall by 260,000 barrels per day to 11.02 million barrels this year, and then rebound to 11.73 million barrels in 2022. In previous forecasts, EIA had predicted that U.S. crude oil production would decrease by 200,000 barrels per day in 2021.
During the COVID-19 pandemic, U.S. crude oil production declined due to declining demand, and it has not yet recovered to the record 12.966 million barrels per day before the November 2019 pandemic. According to the report, due to the decline in crude oil production this year, the consumption growth of oil and other liquid fuels is expected to be lower than previously expected.
EIA expects demand growth to be 1.48 million barrels per day, lower than the 1.55 million barrels per day predicted last month. The agency also lowered its oil consumption growth forecast for next year, from 890,000 barrels per day expected a month ago to 760,000 barrels per day.
[Putin said oil prices may reach US$100 per barrel]
Russian President Vladimir Putin said on Wednesday that oil prices could reach US$100 per barrel, adding that Moscow and its OPEC+ partners are seeking to stabilize the global oil market.
Putin said at an energy forum on Wednesday, "This ($100 per barrel) is very likely, and it (oil prices) is now rising, and we and our partners in OPEC+ are doing our best to stabilize the market."
Putin said that we do not allow large price fluctuations, which is not in our interest. We are not trying to curb production to make oil prices soar... We advocate smooth and balanced changes in (oil production). "
When asked if he plans to increase production to cool the rise in oil prices, Novak said: "We are taking action in accordance with the agreed timetable. The consensus is to increase production by 400,000 barrels per day."
Iraqi Oil Minister Ihsan Abdul Jabbar told reporters, "We think the price will not be higher."
Bank of America's Francisco Blanch said that the current global oil supply gap is about 1 million barrels per day. If cold weather prompts electricity suppliers to switch from natural gas to oil, this shortage in winter may increase by 50%.
Blanch said that oil prices may surge above US$100 per barrel. The basic assumption is that increased air travel will increase demand for oil, which will lead to oil prices reaching US$100 per barrel in 2022. However, due to the situation of natural gas and coal, this time seems likely to be slightly less. There is in advance.
Overall, although Russian President Vladimir Putin is more optimistic about the oil price of US$100/barrel, OPEC is cautious about demand, which increases the profitability of traders, and the API data in the morning shows that the inventory increases, which will limit the rise of oil prices. We are waiting for the evening US oil inventory data. US crude oil inventories are currently expected to increase by 1.05 million barrels. If the data is in line with expectations, under the influence of multiple negative factors, short-term oil prices may fall below the 80 mark again.
GMT+8 8:22, US crude oil is now quoted at US$80.82/barrel.
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