Crude oil inventories fell to a three-year low, and the rebound in risk sentiment helped oil prices continue to rise

On Wednesday (September 22), US crude oil rose more than 2%, as US crude oil inventories fell for the seventh consecutive week, despite unexpected increases in gasoline inventories. At the same time, the Federal Reserve raised its economic expectations for the next two years in the United States, and the rising market risk sentiment also doubled the confidence of oil market bulls.


The EIA inventory report shows that as of the week of September 17, crude oil inventories decreased by 3.841 million barrels unexpectedly, refined oil inventories decreased by 2.554 million barrels, and gasoline inventories unexpectedly increased by 3.474 million barrels.

Crude oil inventories fell to the lowest level since October 2018, indicating that market supply is rapidly tightening.

Phil Flynn, senior market analyst at Price Futures Group, said that overall, the report is bullish because crude oil supply will only get worse in the next few weeks because of tight inventories and refineries resume operations faster than Mexico. The recovery of crude oil supply in the Gulf is fast.

He said that gasoline inventories have increased, but this is usually the case at this time of the year, so this is partly due to seasonality, and partly due to data deviations caused by Hurricane Ida.

At the same time, the general risky sentiment in the market has also boosted the confidence of crude oil investors.

The Wall Street Index rose 1% on Wednesday, the S&P 500 Index and the Nasdaq Index rose 0.95% and 1.02% respectively, and the VIX Panic Index, which represents the volatility of the stock market, fell 14%.

The market has not been affected by the Fed's possible reduction in debt purchases in November. Analysts said that investors have already digested the negative effects of underweight debt purchases. Recently, US stocks have fallen rapidly from their peaks. Investors believe this is a good time to "intervene on dips."

The dot plot shows that the US federal base interest rate will reach 1.8% by the end of 2024, but it is still lower than the Fed’s long-term policy target of 2.5%. Most experts still interpret this as a dovish, which is conducive to the recovery of risk sentiment.

In addition, the Federal Reserve has also raised its GDP growth forecast for the next two years. The growth rate in 2022 will be raised from 3.3% to 3.8%, and it will also be raised from 2.4% to 2.5% in 2023, but it will lower its forecast for 2021 to 5.9%. Increased confidence in economic growth in the next two years will also support crude oil prices to a certain extent.

The US Bureau of Security and Environmental Enforcement (BSEE) estimated on Wednesday that 16.2% or approximately 294,414 barrels per day of crude oil production capacity in the Gulf of Mexico and more than 24% or approximately 54112 million cubic feet of natural gas production capacity are still closed due to the impact of the hurricane.

Phil Flynn said that insufficient production will lead to a dangerous situation. When demand will rise again this winter, the supply of crude oil and natural gas will still fall, which will become a potential factor for future oil price increases.

(U.S. crude oil daily chart)

At 12:05 GMT+8, US crude oil was quoted at US$72.42 per barrel.