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Market News Crude Oil Trading Reminder: Long and Short Contest! Fears of stagnant demand offset by tightening supply, focus on Powell speech

Crude Oil Trading Reminder: Long and Short Contest! Fears of stagnant demand offset by tightening supply, focus on Powell speech

U.S. oil was trading at $102.29 a barrel in Asia on April 21; oil prices were little changed on Wednesday, as broader concerns about economic growth and stagnant oil demand were largely offset by the impact of tightening supply. But as the conflict in Ukraine escalates and the possibility of a prolonged conflict increases, the supply from Russia may be further reduced in the market; focus on Friday's IMF economic discussions with Fed Powell.

2022-04-21
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In Asian hours on Thursday (April 21), U.S. oil was now at $102.29 a barrel; oil prices were little changed on Wednesday, with broader concerns about economic growth and stagnant oil demand roughly offset by tightening supply. But as the Ukrainian conflict escalates and the likelihood of a prolonged conflict increases, the market could see further cuts in supplies from Russia.



During the day, the focus will be on the number of initial jobless claims in the United States for the week ended April 16, and the press conference held by U.S. Treasury Secretary Yellen; at 1:00 on Friday, Federal Reserve Chairman Powell and European Central Bank President Lagarde participated in the IMF's report on the global economy. group discussion.

Bullish factors affecting oil prices


[U.S. crude oil inventories unexpectedly plummeted by 8 million barrels last week]

The U.S. Energy Information Administration (EIA) said on Wednesday that U.S. crude inventories fell sharply last week as exports surged to a more than two-year high, while production remained near pre-pandemic levels. U.S. crude inventories fell by 8 million barrels in the week to April 15 to 413.7 million barrels, compared with analysts' expectations for a rise of 2.5 million barrels in a Reuters poll.

"Increased exports to Europe are driving strong exports, and we should continue to see that momentum in the coming weeks," said Matt Smith, chief U.S. analyst at Kpler. 10,000 bpd, the highest since March 2020, while imports fell to their lowest level since April 2021, reflecting global demand for crude, which has fallen since Russia invaded Ukraine in February.


Those exports offset the release of 4.7 million barrels from the U.S. strategic stockpile as part of the White House's efforts to lower overall oil prices. Refinery crude processing increased by 194,000 bpd last week, and capacity utilization rose 1 percentage point to 91% of total capacity. Meanwhile, overall U.S. demand has slumped, with the four-week moving average of refined oil supplies, a measure of demand, falling to its lowest level since June last year.

U.S. gasoline inventories fell by 761,000 barrels last week to 232.4 million barrels. Distillate inventories, which include diesel and heating oil, fell 2.7 million barrels to 108.7 million barrels, hitting their lowest level since May 2008.

Financial Blog Zero Hedge commented on the U.S. EIA crude oil inventories for the week to April 15. After a sharp increase in the previous week, U.S. crude oil inventories fell by more than 8 million barrels last week, the largest decline since January 2021. Gasoline demand has recovered to "average levels" for this time of year, suggesting demand has not yet fallen significantly. Separately, U.S. crude production was flat at a two-year high.

[Germany will completely stop importing oil from Russia by the end of the year]

German Foreign Minister Bell Berke said on the 20th that Germany intends to completely stop oil imports from Russia by the end of this year. During his visit to the Baltic countries, Bell Burke made the above statement in Riga on the same day; "I also make it clear here that Germany is also gradually getting rid of energy imports from Russia." She pointed out that Germany's oil imports from Russia will be halved by summer, and by the end of the year Imports are reduced to zero. Then there is the move away from gas, which will follow a common European roadmap. "We must quickly end our dependence on Russia for energy".

Bellburke also acknowledged that Germany had previously made mistakes in handling Russian energy supplies. "But we can't turn back the clock and we can't undo this." European security means less reliance on Russia, especially in the energy sector, she said. More than ever, Germany needs to end energy imports from Russia once and for all; Bellburke pointed out that the Baltic countries have taken early steps to significantly reduce their dependence on Russian natural gas, and "Germany also wants to say goodbye to Russian energy imports completely".

Earlier, Kyiv accused Germany of financing Russia by importing oil, gas and coal. EU countries have already decided last week to impose a coal embargo on Russia. German Economy Minister Habeck also believes that "almost no reliance" on Russian oil is possible by the end of this year. As for getting rid of dependence on Russian natural gas, it believes that it will be possible "until the middle of 2024".

[US announces new round of sanctions against Russia]

On April 20, local time, the United States announced the latest round of sanctions against Russia. The sanctions target includes a major commercial bank. The U.S. Treasury Department said in a press release that the new round of sanctions also includes a Russian virtual currency development company, which is also the first time a virtual currency company has been on the sanctions list. In addition, the State Department imposed visa restrictions on 635 Russian citizens, including three Russian officials.

Negative factors affecting oil prices


【U.S. companies suffer from labor shortages and high inflation】

The U.S. economy expanded at a moderate pace from mid-February to early April, with little relief from the impact of high inflation and worker shortages on businesses, a Federal Reserve report on Wednesday showed.

The latest anecdotal evidence from U.S. businesses shows the U.S. economy remains resilient, buoyed by a drop in Covid-19 cases, despite high inflation and damaged supply chains. But the report also noted that persistent problems showed no signs of easing as the Fed prepares to accelerate tightening of borrowing costs to put the economy in a more stable state.

Inflation remains a concern, with demand still far outstripping supply for everything from labor to goods, compounded by China's recent lockdowns to limit the spread of Covid-19 and soaring food and energy costs due to Russia's invasion of Ukraine .

"Supply chain backlogs, tight labor markets, and rising input costs continue to challenge companies' ability to meet demand," the Fed said in its Beige Book, which was conducted in 12 Fed regions and ran through April 11. "Recently Uncertainties arising from geopolitical developments and rising prices cloud the outlook for future growth."

In March this year, the Federal Reserve raised interest rates for the first time in three years, but interest rates are still low, and the current interest rate target range is 0.25%-0.5%.

The Fed is expected to raise rates by 0.5 percentage points at its next policy meeting on May 3-4 and continue to raise rates for the rest of the year in an effort to aggressively curb high inflation.

[Nasdaq falls as Netflix subscribers drop unexpectedly, hitting tech stocks]

The tech-heavy Nasdaq fell on Wednesday as an unexpected drop in Netflix (Netflix) subscribers weighed on the streaming giant and other high-growth companies that investors fear could face a similar post-pandemic outbreak. performance issues.

By contrast, the blue-chip Dow Jones Industrial Average closed higher for a second straight session, boosted by positive earnings from consumer goods giant Procter & Gamble and IT giant IBM. The two companies rose 2.7% and 7.1%, respectively. Netflix tumbled 35.1%, its biggest one-day drop in more than a decade, after the company blamed inflation, the war in Ukraine and fierce competition for subscriber losses, and forecast steeper declines ahead.

The knock-on effects are being felt by fintech companies and those thought to have benefited during the pandemic, with the latter's fortunes believed to have been boosted by pandemic trends such as lockdown measures. Streaming peers Disney, Roku and Warner Bros Discovery all fell more than 5.5%, while stay-at-home winners and Peloton Interactive fell between 6% and 11.3%.

Jason Pride, chief investment officer at Glenmede Private Wealth, said: “With so much profit already being made, it’s going to be difficult to achieve even small growth going forward, and it’s harder to achieve later in the cycle. I think the market is starting to understand that. , need to understand that for the rest of the year."

Market leaders tech and growth stocks have struggled this year as investors worry that rising interest rates will dent their future earnings. The Nasdaq is down nearly 14% so far this year, while the benchmark S&P 500 is down 6.4%.

Overall, the earnings season is off to a strong start. Of the 60 S&P 500 companies that have reported earnings, 80% have beaten profit expectations, according to Refinitiv data. Typically, this ratio is 66%.



Overall, although the sharp drop in U.S. inventories is good for oil prices, there is a risk of further escalation of the conflict between Russia and Ukraine; but under the pessimistic forecast of the global economy, oil prices may remain volatile due to fears of falling demand; pay attention to the IMF economic discussion with Fed Powell on Friday.

At 7:54 GMT+8, U.S. crude oil is now at $102.29 a barrel.
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