On Wednesday, crude oil futures prices rose and fell in both internal and external markets.
On June 15, local time, White House Press Secretary Karine Jean-Pierre announced at a briefing that U.S. President Biden would take action to lower U.S. oil prices by releasing 1 million barrels of oil per day from the Strategic Petroleum Reserve and jointly partners, working together to unlock an additional 240 million barrels of oil.
Pierre said that lowering oil prices also requires the cooperation of oil refining companies, and cannot collect profits at the expense of American families. She said that the last time crude oil was priced at $120/barrel, the average price of gasoline was $4.25/gallon, while the current price of gasoline has increased by 75 cents/gallon. Refining companies’ profit margins have tripled since the beginning of the year.
Pierre confirmed that Biden sent a letter to major U.S. refineries that day, calling on refining companies to take responsibility and cooperate with government actions to lower oil prices.
Data released by the U.S. Energy Information Administration (EIA) showed that U.S. crude oil inventories increased by 2 million barrels in the week to June 10 to 418.71 million barrels. Analysts had previously expected a decrease of approximately 1.3 million barrels. However, the U.S. Strategic Petroleum Reserve inventory fell by 7.7 million barrels, the largest drop on record.
According to Chen Dong, a researcher at Baocheng Futures, the monthly difference structure of the crude oil market continues to be strong, indicating that the supply and demand level still provides support to oil prices. This has also promoted the continued strong performance of oil prices in the past few days against the adjustment of global risk assets. But as the king of commodities, crude oil affects oil prices not only on its own supply and demand level.
According to Chen Dong, OPEC’s May monthly report released on Tuesday night showed that OPEC’s oil production fell by 176,000 barrels per day from the previous month. The main reason was the drop in Libyan production. On Monday, the Libyan Oil Minister announced that Libyan crude oil production fell by 1.1 million barrels. barrels per day, which further increases market anxiety about crude oil supply. However, the patience of crude oil consuming countries with oil prices is now approaching the limit. Faced with inflation that has hit a 40-year high, the Federal Reserve raised interest rates by 75 basis points on Wednesday. The White House stated that the government is paying close attention to inflation and has taken frequent actions recently, including continuing to sell off. 45 million barrels of strategic crude oil and the possibility of an excess profits tax on oil companies are also on the table.
In addition, the recent easing of relations between the United States and Saudi Arabia has also brought potential changes to the supply side. Chen Dong said that as European and American central banks begin the era of “tightening both volume and price”, tighter external liquidity will trigger a revaluation of commodity asset prices, which will have a negative impact on oil prices. In addition, as the market awaits the outcome of the Federal Reserve meeting in recent days, the market has significantly increased its bets that the Federal Reserve will raise interest rates by 75 basis points instead of 50 basis points on Wednesday. This change in expectations has intensified the violent sell-off in global markets. “But in the short term, tight supply continues, and the arrival of North America’s traditional peak consumption season has become the main factor driving up oil prices in the near future.” Chen Dong said.
Huang Liunan, a futures researcher at Guotai Junan, believes that the market has already partially priced in the 75 basis point interest rate hike announced by the Federal Reserve this morning, and Powell’s speech was slightly dovish. The short-term negative impact of tightening on oil prices may be limited. Regardless of the possible recession risk in the future and the Fed’s tightening statement that is more than expected, the center of gravity of oil prices may continue to remain at a high level, and it is too early to start a downward trend.
According to him, judging from the consumption situation, the summer oil consumption peak in the northern hemisphere is far from over. Refinery operations in the United States and Europe are still in the process of seasonal improvement, and demand for crude oil primary processing will not shrink for the time being. At the same time, demand for terminal refined oil products remains strong. The U.S. CPI data for May released last Friday significantly exceeded market expectations, which means that consumption from the terminal is still strong, falsifying the market’s judgment of the turning point of inflation in April. In fact, the performance of the US service industry PMI released earlier was better than expected. Therefore, whether from the perspective of refined oil demand or cracking price differentials, overseas refinery gross profits may remain high for the time being.
In addition, the volume of Russian crude oil exports south to the Asia-Pacific is temporarily limited. Huang Liunan said that since NATO has not explicitly banned China, India, Japan and other major Asia-Pacific countries from importing Russian crude oil, whether Russian crude oil exports can use the Asia-Pacific market to resume exports after a sharp decline in the middle and early second quarter has become the focus of the market.
“Although Rosneft’s route to Asia through shipping channels has not been completely blocked, and many terminals in China and even throughout the Asia-Pacific are filled with Russian medium sour oil, light sour oil, fuel oil and various oil products, this volume Limited by the capacity of the oil transportation market, it is still very limited for the time being.” He said that this can also be confirmed by the still low premiums and discounts of Ural crude oil in the Black Sea region, and exports have not yet achieved a large-scale recovery. Considering that the actual shipping capacity of the oil transportation market is temporarily difficult to recover quickly due to the impact of sanctions, and that significant adjustments to routes will still take time, it may be difficult to see large-scale southbound exports of Russian oil in the short term.
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