Last night, the oil market ushered in great news!
At 10:30 pm on Wednesday night, data released by the U.S. Energy Information Administration (EIA) showed that U.S. EIA crude oil inventories unexpectedly dropped by 12.456 million barrels last week, the largest drop since November last year. It was expected to increase by 2 million barrels. Gasoline and refined oil inventories were both significantly lower than expected.
Specifically, EIA data showed that U.S. crude oil inventories unexpectedly dropped by 12.456 million barrels in the week to May 19. It was expected to increase by 2 million barrels, compared with the previous increase of 5.04 million barrels. U.S. strategic crude oil reserves fell for the eighth consecutive week, with the latest weekly decline of 1.6 million barrels. Crude oil inventories in the Cushing area, where WTI crude oil is delivered, increased by 1.762 million barrels, compared with the previous increase of 1.461 million barrels. Crude oil inventories on the U.S. Gulf Coast fell the most on record. Gasoline inventories fell by 2.053 million barrels, compared with expectations for a decrease of 1.6 million barrels and the previous decrease of 1.381 million barrels. Refined oil inventories fell by 561,000 barrels, compared with expectations for an increase of 500,000 barrels and the previous increase of 80,000 barrels. Refinery equipment utilization changed -0.3%, expected to be 0.6%, and the previous value was 1%.
Currently, U.S. gasoline inventories are at their lowest levels since 2014. U.S. refined oil inventories fell to the lowest level since May 2022 and the lowest seasonal level since 2005, with Midwest refined oil inventories falling to a new low since December 2020.
The EIA’s latest inventory report is generally consistent with the previous day’s API report of sharp declines in both crude oil and gasoline inventories. Crude oil inventories shown by EIA fell even more sharply, and gasoline inventories shown by API fell even more sharply.
On Wednesday, oil prices extended yesterday’s gains. After the EIA data was released, the increase in oil prices expanded to more than 2%. The gains have since receded slightly. As of this morning’s close, WTI June crude oil futures closed up 1.96% at $74.34 per barrel. Brent July futures rose 1.98% to US$78.36 per barrel.
Separately, on Tuesday, Bloomberg reported that Saudi Arabia’s Energy Minister Abdulaziz bin Salman said at the Qatar Economic Forum that oil short sellers should be “careful” that they will continue to feel the pain.
With only about a week left before the OPEC+ June meeting, this warning has ignited expectations that OPEC+ will cut production to stabilize oil prices.
Yang An, head of energy and chemical research at Haitong Futures, said that the Saudi Energy Minister warned short-selling speculators on Tuesday to “be careful”. After that, oil prices began to rebound from the intraday low. Obviously investors are well aware of the huge impact OPEC+ has had on oil prices in the past three years. Influence. In addition, with the arrival of the peak consumption season, the sharp strength of U.S. gasoline has also boosted market sentiment to a certain extent. This has allowed oil prices to temporarily get rid of macro factors during the European period and achieve a simultaneous rise with the U.S. dollar. The latest API inventory report shows that the change in API crude oil inventories in the United States fell by 6.799 million barrels in the week to May 19, which was the largest drop since the week of November 25, 2022. At the same time, gasoline inventories also dropped significantly by 6.398 million barrels, compared with expectations of -1.1 million barrels. The data shows that the tightening of crude oil supply and demand will bring support to oil prices. However, from a macro perspective, it is still not conducive to the performance of risk assets. There is a lack of progress in negotiations to increase the U.S. debt ceiling. Investors are expected to remain cautious before the boots are put on the ground, or soon. The rhythm creates fluctuations and the short-term pattern of oil prices becomes stronger, but grasping the rhythm is still a challenge.
Dong Dandan, chief researcher of CITIC Futures Energy, believes that crude oil terminal consumption indicators are currently stable.
According to Dong Dandan, there are currently mixed increases and decreases in global land traffic. As of the week of May 17, traffic congestion levels in China dropped by 28.8% month-on-month. As of the week of May 16, traffic congestion levels in Europe, North America and other regions in Asia were respectively. Increases of 6.0%, 5.4% and 6.3%. Global air traffic fell slightly on a weekly basis, and the passenger flight schedule from May 16 to 22 means that global aviation fuel demand will fall by 0.9% compared with the previous week; Asia and North America will lead the decline this week, falling by 1.7% and 0.5% respectively. Shipping data shows that Saudi Arabia’s crude oil exports in May will drop by 900,000 barrels per day compared with April, and Saudi Arabia’s production cuts are being implemented as scheduled. Russia is still increasing its seaborne exports. Putin and the Russian Deputy Prime Minister have repeatedly stated that production cuts have been implemented. If true, it means that Russia’s domestic crude oil inventories have fallen sharply. Information agency Rystad estimates that inventories fell by an average of 400,000 barrels per day in April. day. The opacity of Russian inventories prevents markets from confirming this.
“The market is currently in a balanced game of long and short. Bulls can still rely on OPEC+ production cuts. In the past week, leaders or energy ministers from Iraq, Kuwait, the United Arab Emirates, Russia, Saudi Arabia and other countries have publicly stated their support for OPEC+’s joint production cuts. Until the OPEC+ alliance breaks down, it will be difficult for oil prices to weaken significantly. Looking to the market outlook, as more and more data confirm, the macro economy is in a downward cycle, and the continuation of interest rate increases will put increased pressure on the economy. The beginning of interest rate cuts also means that a big crisis has occurred. Risk events and macro factors have a bearish impact on commodities, which is why crude oil bulls have no motivation. Our view on crude oil continuing to trade sideways remains unchanged.” Dong Dandan said.
Overseas institutional financial blog Zero Hedge commented that EIA data confirmed the decrease in crude oil inventories. In recent weeks, the number of drilling rigs has plummeted, recording the largest monthly decline since 2020. A continued pullback in drilling activity could lead to a similar decline in crude oil production in the coming months. Additionally, while disagreements over U.S. debt ceiling negotiations and concerns about inflation pose a threat to oil demandthreats, but strong gasoline consumption supported the oil spot market. A positive demand signal or additional OPEC+ production cuts could cause oil prices to surge.
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