On Wednesday, data released by the U.S. Energy Information Administration (EIA) showed that U.S. EIA crude oil inventories plummeted by 17.049 million barrels in the week ended July 28, the largest weekly decline in history, far exceeding the expected decline of 1.05 million barrels, and the previous value for a drop of 600,000 barrels. Crude oil inventories in the Cushing region decreased by 1.259 million barrels, compared with the previous decrease of 2.609 million barrels. Gasoline inventories increased by 1.481 million barrels, compared with expectations for a decrease of 1.55 million barrels and the previous decrease of 786,000 barrels. Refined oil inventories, including diesel and heating oil, fell by 796,000 barrels, compared with expectations for a decrease of 100,000 barrels.
WTI crude oil futures rose slightly in the short term after the EIA crude oil inventory data was released, and then continued the decline earlier in the day, falling more than 2% during the session and falling below the $80/barrel mark.
As of the close, the September contract of NYMEX crude oil futures fell by US$1.88/barrel, or 2.3%, to US$79.49/barrel; the October contract of ICE Brent crude oil futures fell by US$1.71/barrel, or 2%, to US$83.20/barrel.
Yesterday, the main SC crude oil contract continued to run strongly and continued to refresh the rebound high, closing up 1.23% to close at 625.0 yuan/barrel; the main high-sulfur fuel oil contract also hit a new high in a year, rising sharply to 3.64%, closing at 625.0 yuan/barrel. It closed at 3,640 yuan/ton, leading the rise in the domestic futures market.
Since July, crude oil and fuel oil have experienced an accelerated rise that resonates with macroeconomics and fundamentals. Huang Chen, an energy and chemical analyst at Huishang Futures, told a reporter from Futures Daily that on the one hand, the market is relatively optimistic about China’s refined oil consumption. On the other hand, the contradiction between supply and demand of crude oil has become increasingly prominent. Every summer is the peak demand for crude oil. In July, refineries in various regions maintained high operating rates. Crude oil and refined oil inventories continued to decline. The current apparent demand remains near the high levels of previous years. In addition, the United States’ 12 million barrel strategic petroleum reserve buyback plan in the second half of the year created additional crude oil demand.
“OPEC+ continues to restrict production, and Saudi Arabia has been voluntarily restricting additional production. Global crude oil inventories have been effectively controlled, which overall supports the trend of oil prices.” Yu Pengsen, leader of the energy and chemical industry group of Qisheng Futures, said that major crude oil exporting countries in the Middle East Spot selling prices are at a premium, and strong demand from Asian refineries has also supported oil prices. On the macro front, as the Federal Reserve raises interest rates in July, the possibility of another interest rate increase during the year has dropped significantly. The market generally expects that the Federal Reserve will no longer raise interest rates during the year and will start cutting interest rates starting next year. The continued strong economic data in the United States has led international investment banks to gradually recognize the soft landing of the U.S. economy. There has been no major oversupply of commodities, and the rise in crude oil has been within a reasonable range, resulting in a strong trend in crude oil during the peak season.
According to Li Yunxu, senior analyst at SDIC Essence Futures, the expectation of slow growth in U.S. shale oil production is difficult to break. OPEC is focusing on the sustainability of Saudi Arabia’s additional production cuts. This additional production cut is not supported by the continued recovery on the demand side. Saudi Arabia’s exit point is bound to become more passive. The market has high expectations for the continued extension of production cuts. Later news There are doubts about the strength of further support for prices.
Regarding Russia, reporters learned that Russia’s crude oil production reduction of 500,000 barrels per day is gradually being verified by the market, and it plans to increase crude oil export tariffs. The latest data showed that seaborne crude oil flows at Russia’s Baltic and Black Sea ports fell to the lowest level in seven months, as Russia began to fulfill its previously promised production cuts. Huang Chen analyzed that in order to increase crude oil trade revenue, Russia plans to cut oil price subsidies and propose plans such as increasing export taxes on crude oil, which will increase the price of crude oil in disguise. Saudi Arabia’s additional production cut of 1 million barrels per day took effect in July, and the production reduction plan will be maintained in August. Sudden supply shortage factors such as the suspension of oil fields due to protests in Libya and explosions in Mexican oil drilling have led to higher crude oil and fuel oil prices.
“On the whole, the current micro-level demand data of major consuming countries is still relatively stable. The improvement of the macro atmosphere has made the market optimistic about overseas demand expectations, which has formed a certain positive support for recent oil prices. However, we need to pay attention to inflation concerns after gasoline prices are close to being flat year-on-year. Rekindling the disruption to the pace of interest rate hikes,” Li Yunxu said.
Looking forward to the market outlook, Zheng Mengqi, energy analyst at Hizheng Futures, said that overall, after the macroeconomic sentiment improved, market trading was expected to cut interest rates, coupled with OPEC+ production cuts on the supply side and Saudi Arabia’s additional production cuts, oil prices have received strong support. Although the United States has postponed the replenishment of SPR due to high oil prices, the replenishment amount is small and the U.S. Department of Energy’s SPR is at a low level, maintaining a slow replenishment pace. Therefore, the U.S. Department of Energy’s announcement to suspend SPR replenishment did not have a major impact on oil prices. Currently, under the influence of multiple bullish factors, crude oil prices are on the strong side.
Yu Pengsen believes that in the short term, the United States is still at the peak of summer oil consumption, and travel demand is still relatively strong. Before September, coupled with the threat of Atlantic hurricanes, crude oil is likely to perform strongly. After mid-September, the summer oil consumption peak in the United States has basically ended, and refineries have entered the maintenance season. At that time, they will need to make further judgments based on the overall supply and demand situation. Judging from the trend of the same period in previous years, crude oil is likely to weaken seasonally after mid-September.
In Li Yunxu’s view, in addition to the support brought by the macro level in the near future,��The fundamentals are still in the overall pattern of weak demand expectations and OPEC+’s initiative to reduce supply. The expected tight supply continues, and seasonal inventory removal is relatively smooth. However, compared with the fundamentals at the high point in the first half of the year, the current positive factors such as Chinese demand and additional production cuts have been digested for a long time. Oil prices are already on the high side of the operating range in the third quarter, and the upside space may be relatively limited.
Huang Chen reminded that the most noteworthy factor is the change in the supply and demand structure. Generally, the driving season ends in September every year, and crude oil demand will gradually decrease. It is necessary to pay attention to the OPEC meeting on August 4 to determine whether Saudi Arabia and Russia will continue to reduce production in September. U.S.-Iran relations also need attention. Currently, Iran has fully accepted the supervision of the International Atomic Energy Agency. Its sincerity in returning to the Iran nuclear agreement has increased compared with last year. Iran has more than 1 million barrels per day of idle production capacity. Once an agreement is reached, crude oil will be restored. Exports will have a greater impact on the crude oil market.
Yesterday, high-sulfur fuel oil rose due to the support of production cuts in the Middle East and the restoration of internal and external price differences.
“The trend of fuel oil is obviously stronger than that of crude oil, mainly because fuel oil is more dependent on resources in Russia and the Middle East.” Huang Chen said that with the decline in Russian port shipments, its production reduction of 500,000 barrels per day was confirmed by the market, and The situation between Russia and Ukraine has become volatile again recently, with Russian lawmakers proposing to increase taxes on crude oil exports. In addition, high temperature weather has led to a surge in demand for the use of fuel oil for power generation in the Middle East, making fuel oil spot resources tight.
In terms of low-sulfur fuel oil, according to Li Yunxu’s analysis, Kuwait’s fuel oil exports in July were 1.77 million barrels, which is expected to be mainly low-sulfur resources, an increase of 1.2 million barrels from the same period last year. At the same time, the operating rate of main domestic refineries is high, and the supply side is Low-sulfur fuel oil is still mainly suppressed. Recently, the overseas gasoline and diesel cracking spreads are still on the strong side. The improvement of the macroeconomic atmosphere and the large number of unexpected supply cuts are good for the gasoline and diesel cracking spreads. However, the lack of bright spots in overseas demand and the easing of the contradiction between refining shortages during the year are still expected to be suppressed in the medium and long term. Refinery profits and the shrinking strategy of high-low sulfur spreads continue to deserve attention.
“We are currently in the peak season for shipping. Although the shipping market this year is not particularly good, the actual demand cannot be falsified. In particular, the demand for power generation and combustion is relatively eye-catching during the high temperature period in summer. With the strengthening of crude oil prices, fuel oil will also be affected in the short term. Maintain strength.” Yu Pengsen said that overseas refineries have been undergoing frequent unexpected maintenance recently, which has caused certain disruptions in supply, and the strength of fuel oil is also reasonable. Looking at the market outlook, with the gradual restart of refinery units, fuel oil inventories are expected to increase, and by then, they will gradually become weaker than crude oil.
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