Crude Oil Weekly Review: Multiple negatives suppressed, oil prices fell for three consecutive weeks

This week, US crude oil fell slightly by 0.59% to US$80.69 per barrel. It recorded a three-day losing streak on a weekly basis. The market is worried that the US may release its strategic oil reserves to change the damage to the economy caused by high inflation. At the same time, the strong US dollar has also put pressure on oil prices. In terms of the epidemic, the European epidemic has rebounded again. Although the United States is expected to boost fuel demand by opening its doors, experts are worried that the winter epidemic will rebound.

The United States may release strategic oil reserves

As inflation has reached a multi-decade high, US President Biden is facing increasing pressure, including those in the party, to take action to deal with rising energy prices.

White House spokesperson Jen Psaki said at a press conference on Friday that the United States will do everything possible to reduce gasoline prices and has taken a series of related measures, including contact with multinational organizations such as the Organization of Petroleum Exporting Countries (OPEC).

Earlier this week, 11 Democratic senators called on the Biden administration to consider releasing the Strategic Petroleum Reserve (SPR) or export ban to control crude oil prices.

Commercial Bank of Germany analyst Carsten Fritsch said that as President Biden made inflation reversal his top priority, especially for soaring energy prices, oil prices were under pressure.

"To this end, he has instructed two organizations to discuss ways to reduce energy costs and resist market manipulation in the energy industry. One of the possible measures must be to release strategic oil reserves."

Edward Moya, senior analyst at OANDA, said: "Crude oil prices are falling because of the soaring U.S. inflation that has increased the pressure on the Biden administration to use strategic oil reserves. But energy traders know that the release of strategic oil reserves will only bring very short-term prices. The decline will not relieve too much pressure on American consumers ."

OPEC downgrades fourth-quarter global oil demand forecast

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday lowered its forecast for global oil demand for the last quarter of 2021 , as high energy prices inhibited the economic recovery from the new crown epidemic, but the organization maintained strong growth in 2022 above the pandemic Prediction of the previous level .

OPEC’s monthly report also raised its forecast for next year’s supply from US shale oil producers, which may hinder the organization and its allies’ efforts to balance the market.

OPEC said that the average global oil demand in the fourth quarter of 2021 is expected to be 99.49 million barrels per day, which is 330,000 barrels per day lower than the previous month’s forecast. Demand growth this year is expected to be lowered by 160,000 barrels per day to 5.65 million barrels per day.

OPEC said in the report, "The current assumption is that due to rising energy prices, the pace of recovery in the fourth quarter of 2021 will slow. " The organization also said that the slower-than-expected demand in China and India is also the reason for the lower forecast.

According to the latest forecast, global oil consumption is expected to exceed the 100 million barrels per day mark in the third quarter of 2022, three months later than last month’s forecast.

OPEC also said that next year's global oil demand is expected to increase by 4.15 million barrels per day , maintaining the forecast last month, which will push global oil consumption to exceed the level of 2019.

EIA crude oil inventories increase for three consecutive weeks

The EIA inventory report shows that as of the week of November 5, US crude oil inventories increased by 1.002 million barrels, the third consecutive week of increase, reaching the highest level since August. After the data was released, oil prices fell.

(U.S. crude oil daily chart)

Refined crude oil inventories fell by 2.613 million barrels, and gasoline inventories fell by 1.555 million barrels. In recent weeks, the US oil market has tightened supply. Due to increased demand, as more international travel resumes, consumption during the holiday season may rise further.

Rebecca Babin, senior energy trader at CIBC Private Wealth Management, said that the market seems to be groping in the dark as to how the US government responds to rising energy prices. A stronger U.S. dollar coupled with less bullish inventory data also helped push prices down.

A strong U.S. dollar hits oil prices

After the inflation data released on Wednesday, the market bet that the Fed will raise interest rates ahead of schedule, which boosted the U.S. dollar index. The U.S. dollar hit a 16-month high on Friday, and its weekly line set its biggest weekly since June 20. Increase.

Current market pricing shows that the Fed is expected to raise interest rates for the first time before July next year, and raise interest rates again before December.

According to FedWatch data from the Chicago Mercantile Exchange (CME), the probability of a rate hike was 50% at that time, while the probability of digestion a month ago was less than 30%.

The longer the inflation data exceeds expectations, the more difficult it will be for the Fed, and the Fed may come to the point where it has to raise interest rates earlier.

Louise Dickson, senior oil market analyst at Rystad Energy, said: “This week is a good reminder of the oil market that oil prices are not only affected by the trajectory of supply and demand, but also by monetary policy forecasts and government intervention. Oil prices bring greater downward pressure."

Leona Liu, an analyst at DailyFX in Singapore, said: "Before the Fed’s more hawkish expectations are fully digested by the market-probably not before mid-2022, the U.S. dollar may remain strong. Before then, a strong U.S. dollar may become a rise in oil prices. Resistance."

European epidemic may fall into a "destructive winter"

Recently, the new crown pneumonia epidemic has made a comeback in Europe, which may affect winter oil consumption.

The World Health Organization warned that Europe is facing a "destructive winter." If the current situation continues, between now and February 2022, another 500,000 people in Europe may die from new coronary pneumonia.

The WHO believes that slow vaccination in some parts of Europe, especially the relaxation of prevention and control measures, is the cause of the "resurgence" of the new crown pneumonia epidemic.

The British "Financial Times" stated that European countries have begun to consider adopting stricter anti-epidemic measures, and people are also discussing whether to re-impose travel restrictions during the Christmas holidays. On November 4, the German Minister of Health, Span, asked everyone to show a vaccination certificate and a nucleic acid test certificate when entering public places, and called on Germans to be vaccinated with a booster shot. Eastern European countries also generally require accelerated vaccination.

In fact, the Netherlands, Denmark, Sweden and other countries that were previously "completely open" are planning to or have resumed social control measures such as the "compulsory mask order" and the new crown pass, and at the same time vaccinate the elderly and first-line medical staff to intensify injections to avoid recurrence. "Close the city" on a large scale.

“This is a wake-up call for the world.” According to Singapore’s Lianhe Zaobao, WHO’s Executive Director of the Health Emergency Program, Ryan, said on November 4: “At the moment, people seem to be stubbornly walking on a path... Just vaccinate some more people and everything will be over. But the reality is not the case."

The U.S. reopens its gates, and the number of passengers on international flights has risen sharply

More than 18 months after the border was closed to contain the new crown epidemic, the United States has reopened to citizens of 33 countries , and airlines have begun ferrying thousands of people from Europe and other countries to the United States.

Starting from Monday, vaccinated non-U.S. citizens from previously restricted countries (mainly European countries) can travel to the United States if they can provide a vaccination certificate and a three-day COVID-19 test negative certificate.

United Continental Holdings Ltd. said it scheduled 33 flights from previously restricted countries on Monday. The company expects that compared with a week ago, the total number of inbound international passengers will increase by about 50%.

Air France CEO Anne Rigail said that this is good news for Air France, and even more so for Air France-KLM Group, because the North Atlantic is our main long-distance network. Before the coronavirus epidemic, it accounted for 40% of our entire group's long-distance revenue.

However, it is worth noting that at this time, Europe is once again becoming the “center” of the world epidemic. Newly confirmed cases in the United States have remained high in recent weeks. Some experts worry that the winter epidemic may rebound.

Jennifer Nuzzo, an epidemiologist at Johns Hopkins University, said on Friday that after weeks of decline, the increase in the number of new coronary pneumonia cases in the United States has entered a stable period is a "worrying" signal, which may herald The winter epidemic has rebounded because people are more likely to gather indoors during holidays and cold weather. Last week, the average daily number of new cases in the United States reached 73,000, which was basically the same as the previous two weeks, but it has increased significantly compared with the summer.