The increase in EIA crude oil inventories exceeded expectations, and the U.S. oil kept at a daily low of $0.4 in the short-term.
Wednesday (October 6) New York session, GMT+8 22:30, data released by the US EIA showed that as of the week of October 1st, the US commercial crude oil inventories excluding strategic reserves increased more than expected, and refined oil inventories fell less than expected. It is expected that the increase in gasoline inventories has exceeded expectations. After the release of the EIA data, the US crude oil price remained volatile in the short-term at an intraday low of $0.4.
EIA crude oil inventories increase more than expected
Specific data show that the US EIA crude oil inventory changes in the week ended October 1 actually announced an increase of 2.345 million barrels, which is expected to increase by 700,000 barrels, and the previous value increased by 4.578 million barrels.
In addition, the U.S. EIA gasoline inventories actually announced an increase of 3.256 million barrels for the week ending October 1, and an expected increase of 400,000 barrels, an increase of 193,000 barrels from the previous value; the U.S. EIA refined oil inventory actually announced a decrease of 396,000 barrels for the week ending October 1. Barrels, it is expected to decrease by 750,000 barrels, and the previous value will increase by 384,000 barrels.
The EIA report shows that the U.S. crude oil exports for the week to October 1 were the lowest since the week of July 30, 2021. The U.S. commercial crude oil imports excluding strategic reserves from the week to October 1 were the highest since the week of July 16, 2021.
The EIA report shows that, in addition to the strategic reserves of commercial crude oil, imported 7.035 million barrels per day last week, an increase of 483,000 barrels per day from the previous week. Commercial crude oil inventories excluding strategic reserves increased by 2.345 million barrels to 420.9 million barrels, an increase of 0.6%.
The EIA report shows that US crude oil exports fell by 906,000 barrels per day to 2.114 million barrels per day last week. Last week, US domestic crude oil production increased by 200,000 barrels to 11.3 million barrels per day. The four-week average supply of US crude oil products was 20.743 million barrels per day, an increase of 16.4% over the same period last year.
Analyst Lucia Kassai commented on U.S. EIA crude oil inventory data for the week of October 1, and pointed out that the data showed that many U.S. Gulf Coast refineries were still increasing production capacity during the last week of September, and the refinery utilization rate rose to 88.5% of production capacity. But this should be short-lived, as many fuel manufacturers begin to maintain equipment.
The financial blog Zero Hedging Review EIA data pointed out that crude oil inventories increased sharply last week, confirming API data. This is the second consecutive week of increase in inventories, rather than the "recovery" expected by the market. In addition, gasoline inventories are also jumping.
U.S. crude oil price 5 minutes chart display
The U.S. request for speeding up production was rejected, OPEC oil producing countries still increase production according to the original plan
The 21st OPEC and non-OPEC ministerial meetings of the Organization of Petroleum Exporting Countries ended on 4 local time.
In spite of the uncertainty caused by the epidemic and the pressure from the United States to increase production, all parties decided to continue to implement the production increase plan reached in July: October-November monthly release of 400,000 barrels/day of production capacity, far below market expectations 800,000 barrels per day. Boosted by this, international oil prices fluctuated higher.
Tamas Varga, a senior market analyst at crude oil broker PVM Oil Associates, said that because the potential risk of excess production is not in the interests of oil-producing countries, OPEC and non-OPEC oil-producing countries (OPEC+) rejected the United States' request to increase production. In the short term, he is optimistic about the global economy and oil prices, as the widespread promotion of vaccination and policy support will promote the continued recovery of economic and energy demand. However, he emphasized that the factors that limit the increase in oil prices also need to be paid attention to, such as the return of Iranian crude oil to the market, the impact of the Fed's policy adjustments on the US dollar due to the increase in output of other competitors and rising inflation.
The OPEC+ meeting process this month can be described as twists and turns. Although Brent crude oil broke through the US$80 mark last week, the keynote within the oil-producing countries on the eve of the meeting was still to maintain the existing agreement to increase production.
On September 29, the OPEC+ Joint Technical Committee (JTC) issued a report stating that according to this year's global energy demand growth of 6 million barrels per day, the market will have a gap of 1.1 million barrels per day. With the gradual release of production capacity, based on its baseline assumptions and based on the estimated demand of 4.2 million barrels per day, the oil market will have a surplus of 1.4 million barrels per day next year, slightly lower than the September forecast of 1.6 million barrels per day.
OPEC Secretary General Barkin believes that the current agreement will help maintain the balance of the oil market. From our standpoint today, the OPEC and non-OPEC ministerial decision to return 400,000 barrels per day to the market per month will continue to help balance increased demand to meet demand while preventing potential oversupply. OPEC wrote on social media.
However, the pressure from the United States once made additional production increases possible. U.S. National Security Adviser Sullivan once again had a conversation with Saudi Crown Prince Ben Salman about oil prices after a lapse of nearly two months. Representatives of oil-producing countries proposed to double the output to 800,000 barrels in November to meet market requirements. OPEC+ sources told the media. The market may need more oil than currently planned, and we cannot rule out any options.
What is slightly surprising is that this time the oil-producing countries organization once again rejected the request for additional production increases. OPEC+ concluded the meeting with a very brief statement, and all parties reached a consensus based on the current oil market fundamentals and prospects. The content of the statement is roughly the same as in previous months. The committee emphasized the importance of complying with the production reduction agreement. The November quotas of various oil-producing countries continue to follow the July plan. At the same time, the compensation reduction period for countries that have not completed their quotas will remain unchanged until the end of December. According to the schedule, the next OPEC+ ministerial meeting will be held on November 4.
Analyst Tamas Varga said that OPEC is still in control of oil supply and can adjust production plans according to actual conditions. The potential impact of excess production on oil prices is not in the interests of countries. At the same time, the continued decline of oil inventories is still widespread. As expected, concerns about supply austerity are evident in the spread between short-term and forward futures contracts. The discount of the Brent crude oil contract in December 2021 to the contract in December next year is US$7.6, which is nearly double that of late August. The impact of the epidemic seems to be weakening.
The world's largest oil company believes OPEC+ will boost oil prices in the coming months
According to the Victor Group, OPEC+'s production policy will be the main factor affecting oil prices in the coming months.
The world’s largest independent oil trader said that it is unlikely that Iranian oil will return to the global market this year, and that the investment of US shale oil producers is not enough to quickly increase production.
Mike Muller, head of the Asia region of the Widow Group, said that pricing control is largely in the hands of OPEC+. In the United States, if you need additional oil, the number of wells cannot be adequately supplied.
As Brent crude oil climbed above US$80 per barrel for the first time since 2018 last week, some traders called on OPEC+ to announce plans for faster production growth.
OPEC+ is gradually relaxing the production cuts it started since the new crown epidemic swept the energy market last year. They have previously stated that they will increase daily production by 400,000 barrels per month before mid-2022.
The shortage of natural gas in Europe has exacerbated the tension in the oil market, and companies are forced to switch to using crude oil to produce electricity.
Mike Muller said that some OPEC+ member states give the impression that they are not worried that oil prices exceeding $80 may curb demand. He believes that they "hope to make a lot of money before Iranian and American crude oil enters the market."
Iran calls on the U.S. and Europe to lift sanctions on Iran to ease the global energy crisis
According to a report by Iranian National Television on the 5th, Iranian Oil Minister Javad Ogi recently called on the United States and European countries to lift sanctions on Iran in order to alleviate the global energy crisis.
After attending the 21st Ministerial Meeting of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC oil-producing countries on the 4th, Ogi said that the United States and some European countries have hindered Iran’s oil exports for many years, and Iran is not the only party paying the price. The border policy also has a negative impact on the people of the United States and Europe.
Ogi said that Iran is willing to increase oil production and stabilize the energy market. Policymakers in the United States and European countries should "learn lessons" and lift sanctions against Iran to alleviate the global energy crisis and allow countries around the world to obtain cheaper energy.
Iran is OPEC's third largest oil producer. In May 2018, the U.S. government unilaterally announced its withdrawal from the comprehensive agreement on the Iranian nuclear issue, and subsequently restarted and added a series of sanctions against Iran, especially the implementation of the “zero exemption” blockade on Iran’s oil exports in May 2019, which seriously hindered Iran’s oil exports. .
U.S. natural gas prices have risen sharply, driving oil prices on the side
Some analysts believe that this winter, natural gas prices in the United States will soar as global natural gas prices repeatedly record highs. This indicates that the current energy crisis will soon hit the United States, the world's largest natural gas producer.
Natural gas prices in Europe and Asia have more than tripled this year, resulting in a reduction in production activities. Since the US’s export capacity is still relatively small and has sufficient natural gas supply, it is immune to the tightening of the global natural gas market.
The US market is concerned about the coming cold winter, especially in New England and California, where the price of natural gas delivered this winter is much higher than the national benchmark. In New England, buyers expect the cost of natural gas to exceed $20 per million British thermal units.
New England and California will face higher natural gas prices this winter. For New England and California, high natural gas prices in winter are nothing new. In the coldest days in the past, the supply of natural gas was often restricted due to the limited number of natural gas pipelines to these two areas, and this winter may be even worse. In addition, over the years, both regions have actively moved away from fossil fuels through regulations, power plant decommissioning, and carbon pricing. This has made fossil fuel power generation, especially coal power generation more expensive.
Currently, the price of US natural gas delivered to the Henry Hub terminal in Louisiana has exceeded US$6 for the first time since 2014. The Henry Hub price is the benchmark natural gas price in the United States. In January of this year, the price was in the same range, indicating that buyers believe that the United States will have sufficient pipelines and storage channels to ensure natural gas supply this winter.
Matt Smith, chief oil analyst for the Americas at Kpler, a commodity analysis company, said: Henry Hub prices will continue to rise in the winter, but we should see even greater increases in New England and California.
Gas-fired power plants are expected to generate 49% of the electricity in New England, consistent with the past five years. But as the economy recovers, overall electricity demand is rising. Caroline Pretyman, spokesperson for Eversource Energy, New England’s largest energy supplier, said: The factor driving natural gas prices is that as the economy recovers, the demand for pipeline natural gas is expected to increase, and supply is gradually gradually following the downturn in demand during the epidemic. recover.
Natural gas prices in California are also showing an upward trend. This week, the price of natural gas for delivery in Southern California in January 2022 exceeded $13, which will be the highest record outside of February 2021. (In February of this year, the freezing disaster in Texas pushed natural gas prices in many parts of the United States to record levels)
The increase in natural gas prices in California is due to a long drought that the state experienced limited its ability to generate electricity through hydropower. In addition, analysts said solar power generation capacity is also limited by wildfire smoke coverage. Therefore, the federal government predicts that the state will rely more on gas-fired power plants, and gas-fired power plants are expected to account for about 45% of power generation this winter, higher than the five-year average of 41%.
Britain’s "oil shortage" intensifies, and London’s fuel supply is 20% short of normal levels
On the 2nd local time, the British Gasoline Retailers Association stated that the current fuel crisis in some parts of the UK continues to intensify, and the situation in southeastern England, including the capital London, is not optimistic.
According to data from the British Gasoline Retailers Association, as of October 1, nearly 30% of the nearly 5,500 independent gas stations in the UK they represent have no gasoline or diesel for sale. The fuel supply level in the London area is less than 20% of the normal supply. Gas stations are constantly closed due to sold-out fuel, and local residents often need to queue for hours to buy fuel.
On the 2nd, British Prime Minister Johnson stated in an interview that the recent fuel shortage is caused by demand, and the problem is not in the supply chain, and he called on motorists to return to normal buying habits. In response to the fuel crisis, the British government announced on the 1st that it had recruited 200 soldiers operating tank trucks, of which 100 were tank truck drivers. They will fill the vacancies from the 4th and begin transporting fuel.
With a drop in gasoline inventories in London, a local gas station took the opportunity to increase prices by more than twice. British media said that gasoline inventories in the British capital London are declining, while a gas station is taking advantage of this opportunity to make a profit.
According to reports, the British Gasoline Retailers Association stated on the 2nd that inventory levels in the capital London and the southeast are falling sharply. Under this circumstance, the price of gasoline at a gas station on Sloane Avenue, south of Kensington, London, soared, with a price of 2.93 pounds per liter, more than twice the normal average.
According to the report, this means that the driver can only get less than 7 liters of gasoline for 20 pounds, and a car will cost at least 150 pounds to fill up the gas. Simon Lloyd, a 56-year-old citizen of London, said that despite the high cost, it did not scare people at all. There were still people who waited for hours to refuel.
Tens of millions of families in Europe may be trapped in "energy poverty"
Last year, under the impact of the epidemic, many energy giants once saw a sharp drop in income and a heavier debt burden. Now, as the energy crisis intensifies, the profits of energy giants have risen sharply.
However, this has also attracted the attention of regulators, because as energy prices rise, tens of millions of European households may not be able to afford heating this winter and fall into the predicament of "energy poverty".
In the third quarter of last year, the energy giant Exxon Mobil lost 680 million U.S. dollars. Now, the company predicts that the increase in natural gas prices alone may increase profits by 700 million U.S. dollars in the third quarter of this year. In addition, the increase in crude oil prices Will further help raise 400 million US dollars.
In the past few years, ExxonMobil's profit contribution from natural gas has been lower than that of crude oil, but this year the situation has obviously changed. In addition to ExxonMobil, it is expected that energy giants such as Royal Dutch Shell may also benefit from the increase in energy prices.
However, the profitability of energy giants has also attracted the attention of regulators in Europe. Spain has previously stated that it will take action and redistribute the "excess profits" earned by energy companies, and the United Kingdom is also considering tax increases. .
British Minister of Commerce, Energy and Industrial Strategy Kwasi Kwotten also stated that he is considering imposing a so-called "windfall profit tax" on energy companies that profit from the increase in natural gas prices. He also said that such a tax increase may be a "correction". A way of the market.
British Secretary of Commerce Kwasi Kwotten: The British government is very clear that protecting the interests of consumers is our main job. We have to find corresponding measures to protect consumers effectively. For this reason, we need to set a ceiling on energy prices. .
This winter, tens of millions of households in Europe may not be able to afford heating and fall into so-called "energy poverty." According to the European Union's definition, this term refers to the inability to afford the "comfortable indoor temperature".
A research report from the team of Stefan Buzarovsky, a professor at the University of Manchester and chairman of Engager, an energy poverty research institute, pointed out that before the epidemic, there were about 80 million households in Europe who had difficulties in this regard. The situation has further deteriorated. On the whole, Bulgaria and Lithuania have the worst conditions, with nearly 30% of the total population living in "energy poverty", while Switzerland and Norway have the least risk.
In Europe, about 7 million households are notified of energy cuts every year. At present, some experts and rights groups are also calling on the EU to legislate to prohibit suppliers from cutting off energy supply to residents in the short term.
Institutions have raised oil price forecasts
Goldman Sachs also continued to sing about international oil prices, saying that structural demand will replace cyclical factors to support oil prices to continue to rise, and raised its forecast for Brent crude oil at the end of the year to $90/barrel.
Goldman Sachs pointed out that the current global crude oil supply and demand gap is still greater than the bank's expectations. On the supply side, Hurricane Ida offset the increase in OPEC+ production since July, and the current shale oil production remains low.
On the demand side, the current increase in demand for crude oil is jointly promoted by developed countries and emerging market countries. The lower hospitalization rate has proven the effectiveness of the new crown epidemic and has caused more countries to restart their economies. As the northern hemisphere enters winter, a severe global shortage of natural gas will push up the demand for oil-fired power generation.
In terms of crude oil inventories, Goldman Sachs stated that the high crude oil inventories accumulated during the new crown epidemic are rapidly depleting at a record rate of 4.5 million barrels per day. The related consumption has exceeded OPEC+'s ability to increase production in the short term, and the resumption of shale oil production in the United States is still in the initial stage. This laid the foundation for global crude oil inventories to fall to their lowest level since 2013 by the end of the year.
Goldman Sachs emphasized that the current global crude oil production lacks strong support from cyclical capital, and OPEC+ idle capacity is rapidly decreasing. Taking into account the reduction in crude oil production brought about by the clean energy policy, all of these will support the long-term increase in global oil prices.
Some energy analysts said that some countries had hoped that the recent soaring oil prices would persuade the group to provide more crude oil supplies, but the move hinted that the organization's stance on increasing production was relatively negative, and crude oil prices would usher in a long-term strong market. Analysts even believe that crude oil prices may look towards $100 per barrel.
Tamas Varga, a senior analyst at PVM Oil Associates, said in a research report that the market is full of confidence and the question is whether there is a theoretical basis for this optimism. The global demand for crude oil is recovering from the COVID-19 pandemic faster than many people expected, while the supply of crude oil was interrupted by hurricanes and low investment.
Varga said that the $80 oil distribution may feel like it has reached its peak. Until the first cold snap in the northern hemisphere arrives, additional demand may trigger a new round of purchases, and there may still be room for upside in the short term.
Kieran Clancy, Capital Investment's macro commodities economist, believes that the pressure for OPEC+ to restore market supply more quickly has been increasing. Their refusal to do this means that the market will continue to be in a state of'demand far exceeding supply' in the fourth quarter, which ensures that oil prices will remain high for the rest of the year.
Clancy said that in fact, it is uncertain whether OPEC+ is capable of sustaining this increase in production. Due to the disruption of operations in Angola and Nigeria, OPEC failed to complete its production increase target in August. If even the 400,000 barrels per day target cannot be achieved, oil prices will remain high next year.
Analysts at Bank of America’s Global Research Department said last month that if winter temperatures are lower than expected, the bank may advance its oil price target of $100 per barrel. In addition, Goldman Sachs analysts recently raised their year-end oil distribution price forecast from US$80 to US$90 per barrel on the grounds that global demand is recovering faster than expected.
The Eurasian Group, a risk consulting firm, said in a report: OPEC members generally do not think price increases are a key issue for the time being. But Saudi Arabia has realized that the country has begun to reduce its official selling prices to core customers.
On the demand side, energy analysts from the Eurasian Group said that in the short term, the recurrence of the cold winter throughout the northern hemisphere may cause major energy supply shortages in many major industrial centers. The Eurasian Group expects that the price of Brent crude oil at the end of the year will be US$75 per barrel and will fall to US$67 next year.