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Market News Crude oil trading reminder: Inventories have fallen to the lowest in three years, and demand increases as winter approaches. Goldman Sachs is bullish to $90!

Crude oil trading reminder: Inventories have fallen to the lowest in three years, and demand increases as winter approaches. Goldman Sachs is bullish to $90!

During the Asian session on September 23, US crude oil hovered around 71.94. Oil prices closed higher on Wednesday. US crude oil futures rose 2.5%. Previous data showed that US crude oil inventories fell to the lowest level since October 2018. At the same time, the US stock market rose, and investors' concerns about the Asian market eased. These good news obscured the Fed's hint that it may soon begin to reduce the impact of debt purchases. Nearing the arrival of October, oil prices are concerned about the Iranian nuclear talks. At present, the situation between the United States and Iran is still stalemate.

LEO
2021-09-23
9139

During the Asian session on Thursday (September 23), US crude oil hovered around 71.94. Oil prices closed higher on Wednesday. US crude oil futures rose 2.5%. Previous data showed that US crude oil inventories fell to the lowest level since October 2018. At the same time, the US stock market rose, and investors' concerns about the Asian market eased. These good news obscured the Fed's hint that it may soon begin to reduce the impact of debt purchases.

During the day, we will focus on the number of initial jobless claims in the United States as of September 18 and the initial value of the Markit manufacturing PMI in the United States in September.



Bullish factors affecting oil prices


[S&P 500 index hits the biggest increase since July]

The S&P 500 Index recorded its biggest gain since July on Wednesday, rebounding from a two-month low. Prior to this, Fed Chairman Powell said that it may start to reduce the code as early as November and complete the reduction by the middle of next year. The index closed up about 1%, rising for the first time in five trading days. Nine of the 11 major industry sectors rose, led by the energy and financial sectors.

Fed Chairman Powell said that it may start to reduce the scale of asset purchases as early as November and complete this process by mid-2022. Fed officials have previously revealed that they are increasingly inclined to start raising interest rates in 2022.

Krishna Guhawrote, vice chairman of Evercore ISI, wrote in a client report that the stock market appears to be getting preliminary clues from the Fed’s optimistic forecast of the economic outlook for 2022 and the inconclusive conclusion of whether interest rates will increase in 2022.

Mike Loewengart, managing director of investment strategy at E*Trade Financial, said that if you take a step back and look at it, the Fed’s position is still accommodative, and if the economy is as strong as the data shows, it is reasonable for the Fed to want to return to normal, and given that In the recent volatility, investors may regard the reduction forecast and the possibility of raising interest rates in 2022 as a vote of confidence that the economy is still on the path of recovery. "

[Last week U.S. crude oil inventories fell to the lowest level since October 2018]

The U.S. Energy Information Administration (EIA) said on Wednesday that last week U.S. crude oil inventories fell to the lowest in nearly three years, gasoline inventories rose, and the refining industry continued to resume production after Hurricane Ida.

As of the week of September 17, crude oil inventories fell by 3.5 million barrels to 414 million barrels. Analysts surveyed by Reuters estimated a decrease of 2.4 million barrels. Currently, crude oil inventories are at their lowest level since October 2018. Tight supply and strong demand have helped push up oil prices.

Weekly data shows that refining activities and crude oil production have returned to pre-hurricane levels. With the resumption of operations of offshore facilities in the Gulf of Mexico, crude oil production this week jumped 500,000 barrels per day to 10.6 million barrels per day.

The refinery's refining capacity increased by 960,000 barrels per day last week, and the capacity utilization rate rose by 5.4 percentage points to 87.5%. The refinery restarted key equipment.

The total supply of refined oil jumped to 21.1 million b

US gasoline inventories increased by 3.5 million barrels to 221.6 million barrels, which is estimated to decrease by 1.1 million barrels, which cooled the market’s optimism. Distillate stocks, including diesel and heating oil, fell by 2.6 million barrels, which is expected to decrease by 1.2 million barrels.

According to EIA, US crude oil imports increased by 519,000 barrels per day last week. Crude oil inventories at the Cushing Crude Oil Futures Delivery Center in Oklahoma fell by 1.5 million barrels last week.

The financial blog Zero Hedge commented on US EIA data. U.S. crude oil production is still severely affected by Hurricane Ida. Just this week, Royal Dutch Shell announced that due to the damage caused by “Ida”, part of its offshore production in the Gulf of Mexico will be suspended. By the end of this year. Due to extreme weather disrupting the supply of crude oil in the United States, and rising natural gas prices triggering expectations that consumers may switch to oil, crude oil prices have risen this month.

[Goldman Sachs expects oil prices to reach US$90 per barrel]

Jeff Currie, Global Head of Commodity Research at Goldman Sachs, said that if it turns out that the northern hemisphere winter is colder than usual this year, oil prices could soar to $90 per barrel. This is $10 higher than Goldman's current forecast. At the same time, high natural gas prices have brought catastrophic consequences to the British power supply companies.

In an interview with Bloomberg TV on Wednesday, Currie said that in the context of global crude oil production constraints, the tight supply of natural gas in Europe will lead to an increase in oil demand. The global factors he mentioned include hurricanes that disrupted crude oil production in the Gulf of Mexico.

Currie said that the rise in natural gas prices shows no signs of abating due to tight supply and surge in demand, "especially outside the United States." "The pressure on the supply chain is too great to withstand any type of interruption."

Lipow Oil Associates President Andrew Lipow said that as global demand recovers and inventories continue to decrease, crude oil prices are still supported.

Phil Flynn, a senior market analyst at Price Futures Group Inc., said that market attention has returned to supply and demand, the market looks very bullish, and there may be insufficient supply. As winter approaches, there are real concerns about supply.

Negative factors affecting oil prices


[U.S. second-hand housing sales fell in August]

The decline in second-hand housing sales in the United States in August indicates that demand is slowing, and the decline in housing and high housing prices have caused some buyers to leave the market. According to data released by the National Association of Realtors (NAR) on Wednesday, second-hand housing sales in August fell by 2% from the previous month, at an annual rate of 5.88 million units, in line with economists' expectations. NAR chief economist Lawrence Yun said in a conference call with reporters, "Obviously, residential sales are slowing down, but they are still higher than pre-epidemic levels."



This decline shows that although financing costs are still at historically low levels, the limited number of properties for sale and soaring house prices are limiting demand. Driven by increased sales of high-end properties, the median selling price of second-hand houses in August rose 14.9% year-on-year to US$356,700.

Due to high housing prices, the proportion of first-time home buyers fell to 29% last month, the lowest level since 2019. Last month, there were 1.29 million residential units for sale, a year-on-year decrease of 13.4%. At the current rate, it only takes 2.6 months to sell all the houses, while the average time before the outbreak is about 4 months.

Real estate agents believe that as long as the digestion time is less than 5 months, it indicates that the market is tight. Yun predicts that the inventory of homes for sale will increase from the end of this year to 2022.

[Iraqi Oil Minister said OPEC and allies are committed to maintaining oil prices at around US$70]

According to a report from the Iraqi state news agency INA on Wednesday, the Iraqi Oil Minister said that as the global economy recovers, the Organization of the Petroleum Exporting Countries (OPEC) and its allies are working hard to keep crude oil prices at around $70 per barrel.

Minister Ihsan Abdul-Jabbar added that the ministry “wants to maintain oil prices above US$65 per barrel.”

He said that Iraq’s oil exports will continue to increase at an average rate of 400,000 barrels per month, and the country’s goal is to export 3.4 million barrels per day in September.

[Iran is taking steps to restart negotiations to resume the Iranian nuclear agreement]

Iran’s official Islamic news agency said on the 22nd that Iran’s Foreign Minister Amir Abdullahhiyan was in New York meeting with the foreign ministers of the parties involved in the Iranian nuclear agreement. The Iranian Ministry of Foreign Affairs stated that negotiations on the resumption of the Iranian nuclear agreement will be restarted in early October. Iran has notified Britain, France, Germany, China and Russia. The Iranian Foreign Minister stated that Iran will continue to advance negotiations, but so far, the Biden administration’s policies and practices regarding Iran and the Iran nuclear agreement are not constructive.



On the whole, the sharp drop in inventories has contributed to the rise in oil prices; in the approaching winter, expectations of increased demand for crude oil have risen, further boosting oil prices; in addition, as October is approaching, oil prices are concerned about the Iranian nuclear talks, and the current situation between the United States and Iran is still stalemate .

GMT+8 8:00, U.S. crude oil is now quoted at US$71.94/barrel

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