Crude oil trading reminder: falling inventories and increasing demand, oil prices hit a new high since March, Iran may help bulls again

In Asian time on Thursday (June 9), U.S. oil is now at $122.30 per barrel; oil prices rose 2.2% on Wednesday, hitting the highest since March 9 at $123.16 per barrel. The decline in inventories and increased demand boosted oil prices higher ; Iran decided to shut down the 2 monitoring equipment of the International Atomic Energy Agency in the Iranian nuclear facility, and then help the bulls.



During the day, the focus will be on the number of initial jobless claims in the United States for the week ended May 30, and the Federal Reserve's quarterly financial account report on Friday at 00:00.

Bullish factors affecting oil prices

[U.S. Strategic Petroleum Reserve crude oil inventories fall at a record pace, gasoline demand rises]

The U.S. Energy Information Administration (EIA) said on Wednesday that U.S. commercial crude oil inventories unexpectedly rose last week, while crude stockpiles in the Strategic Petroleum Reserve fell at a record pace as refinery runs rose to their highest level since January 2020.

Crude inventories rose by 2 million barrels in the week to June 3 to 416.8 million barrels, while analysts polled by Reuters had expected a drop of 1.9 million barrels. Crude inventories in the Strategic Petroleum Reserve (SPR) fell by a record 7.3 million barrels to 519.3 million barrels, the lowest since March 1987.

Refinery runs rose by 354,000 bpd last week to 16.4 million bpd, the highest level since January 2020, the EIA said. "The increase in commercial crude inventories is partly due to inventory transfers from the reduction in the Strategic Petroleum Reserve, but these inventories will continue to decline significantly, which is expected for the next few months," said Tony Headrick, energy market analyst at CHS Hedges. A bullish factor. The draw in gasoline inventories was a bright spot in the report, markets across the U.S. are tight and demand remains strong.”

Crude inventories at the Cushing, Oklahoma delivery hub fell by 1.6 million barrels last week, the EIA said. Refinery capacity utilization rose 1.6 percentage points last week to 94.2%, the highest since December 2019.

U.S. gasoline inventories fell by 800,000 barrels last week to 218.2 million barrels, the EIA said, compared with analysts' expectations for an increase of 1.1 million barrels. Distillate stockpiles, which include diesel and heating oil, rose by 2.6 million barrels last week to 109 million barrels, more than double the forecast for a 1.1 million-barrel rise, while net U.S. crude imports rose by 1.69 million barrels a day, EIA data showed.

Rebecca Babin, senior energy trader at CIBC Private Wealth Management, said this week's government inventories report showed implied gasoline demand recovering to a 5-year average.

[OPEC+'s efforts to boost oil production are not encouraging]

UAE Energy Minister Suhail bin Mohammed al-Mazroui said on Wednesday that efforts by OPEC+ oil producers to raise output were "not encouraging", noting that they were 2.6 million bpd short of their target. "Based on last month's report, we have seen OPEC+ compliance (to cut production) exceeding 200 percent," Mazroui told an energy conference in Jordan.

[IEA director Birol says harsh and long winter could trigger energy shortages in Europe]

The head of the International Energy Agency (IEA), Fatih Birol, said on Wednesday he was concerned about the oil market this summer; he was worried about rising prices for gasoline, diesel and jet fuel, as tensions in Russia and Ukraine deepened Europe's energy crisis After that, Europe could face energy shortages this coming winter. "I'm especially worried about the gas market, which could be difficult if we have a harsh and long winter," Birol told the International Energy Agency's annual energy efficiency conference in Sonderborg, Denmark.

Marko Kolanovic, chief global market strategist and co-head of global research at JPMorgan, believes the U.S. economy is strong enough to handle oil prices as high as $150 a barrel.

"Oil prices could surge further, especially given the situation in Europe, we wouldn't be surprised, but it could be a short-lived peak and eventually, prices will normalize," Kolanovic said.

"We think consumers can afford $130 or $135 because we experienced that from 2010 to 2014," Kolanovic said. "It's basically that level when adjusted for inflation. So we think consumers can live with it. at this point."

[Iran decides to shut down 2 monitoring devices of the International Atomic Energy Agency in Iranian nuclear facilities]

The Atomic Energy Organization of Iran issued a statement on June 8, deciding to shut down two surveillance camera equipment installed by the International Atomic Energy Agency in Iran's nuclear facilities from that day. The Atomic Energy Organization of Iran's measures were implemented in response to "illegal acts" by the International Atomic Energy Agency, the statement said. Iran has so far cooperated extensively with the IAEA, but the IAEA does not appreciate the cooperation from Iran, but considers such cooperation to be Iran's responsibility. The statement also said that more than 80 percent of the camera equipment installed by the IAEA at Iran's nuclear facilities will continue to exist and continue to function as in the past.

The move has heightened tensions with the United States and other countries negotiating with Iran over its nuclear program, and could keep sanctions in place, keeping Iranian oil out of global markets for longer.

[Rosneft delays signing of crude oil deal with two Indian refiners, citing lack of supply]

Rosneft has delayed signing new crude deals with two Indian state-owned refiners, people familiar with the matter said. The lack of new long-term supply deals could prompt Indian refiners to turn to the spot market for more expensive oil. It also shows that Russia has managed to keep oil exports going despite increased pressure on Russian revenues from Western sanctions. So far, only Indian Oil has signed an agreement with Rosneft, Hindustan Oil and Bharat Oil have been rejected by Russia, though they may get around 1-2 million barrels of oil from the spot market in July . Rosneft is no longer being sold at deep discounts, and sales offers on a delivery-in-port (DAP) basis are becoming rarer.

Negative factors affecting oil prices

[OECD downgrades economic growth forecast]

The Organisation for Economic Co-operation and Development (OECD) on Wednesday cut its growth forecasts and raised its inflation forecast, saying that while the global economy should avoid 1970s-style stagflation, the war in Ukraine has dimmed growth prospects far. The OECD expects the global economy to grow by 3% this year, well below the 4.5% forecast when it updated its forecast in December.

The Paris-based OECD said in its latest Economic Outlook report that growth will slow further next year, to 2.8% from a previous forecast of 3.2%.

At the same time, there is unlikely to be any quick easing of the upward trend in prices, with headline inflation in OECD countries expected to peak at 8.5% this year before gradually easing back to 6% in 2023. The OECD had expected inflation to peak at 5% before gradually falling back to 3% in 2023.

Despite lowering growth and raising its inflation outlook, the OECD sees limited risks of a stagflation similar to the mid-1970s, when the oil price shock triggered runaway inflation and surging unemployment. In particular, advanced economies, which are more driven by services than in the 1970s, are now less energy-intensive, and central banks are freer to fight inflation without being held back by governments more concerned with unemployment.

In countries with high inflation, such as the United States and Eastern Europe, the OECD said it sees good reasons to steadily withdraw monetary policy stimulus. The U.S. economy is expected to grow 2.5% this year as pandemic-related fiscal stimulus expires, before slowing to 1.2% in 2023, down from previous forecasts of 3.7% in 2022 and 2.4% in 2023.

The euro zone has been greatly affected by Russian energy imports and the war in Ukraine. The economy is expected to grow by 2.6% this year and 1.6% in 2023, lower than the previous forecast of 4.3% and 2.5%.

[The three major U.S. stock indexes closed lower]

U.S. stocks ended lower on Wednesday as U.S. Treasury yields rose above the psychologically important 3 percent mark and oil prices jumped, raising concerns about the outlook for inflation and interest rates. Markets fell broadly, with the S&P 500 down more than 1 percent, snapping a two-day winning streak.

Intel Corp tumbled 5.3 percent, the biggest drag, after Citigroup cut its forecast for the chipmaker for the second time in a week. Citigroup pointed to uncertain demand for PCs and forecast the company could issue a warning of weaker-than-expected second-quarter earnings. Other chip stocks also fell.

"The 10-year U.S. Treasury yield is up more than 3%, which may be part of the reason why we're seeing the stock market fall today, and that mark is on the radar because it represents higher interest rates," said Robert Pavlik, senior portfolio manager at Dakota Wealth. , which also reflects inflation and market volatility."

The yield on the U.S. benchmark 10-year Treasury note climbed after tepid demand for the 10-year Treasury note sold by the U.S. Treasury Department. Rising yields are often a negative for stocks. Investors were also cautious ahead of Friday morning's release of U.S. consumer price data. The report is expected to show inflation remained stubbornly high in May, but year-on-year increases in core consumer prices, which exclude volatile food and energy, are likely to ease.

【Over 700 suspected cases of acute hepatitis in children of unknown etiology have occurred worldwide】

WHO Director-General Tedros Adhanom Ghebreyesus said that 34 countries and regions have reported 700 suspected cases of acute hepatitis in children of unknown etiology to WHO, and 112 related cases are under investigation. At least 38 of them require liver transplants, and 10 have died so far. WHO is working with countries to study the cause, and there are usually five viruses that cause hepatitis, but none of these viruses have been detected in these cases.

[More than 1,000 monkeypox cases have been found in 29 non-monkeypox-endemic countries and regions around the world]

On the 8th local time, WHO Director-General Tedros Adhanom Ghebreyesus said that 29 non-monkeypox-endemic countries and regions have reported more than 1,000 confirmed cases of monkeypox to WHO, with no deaths. The monkeypox virus may have been circulating undetected for some time in some non-monkeypox-endemic countries and regions, and WHO is concerned about the risk to vulnerable groups such as children and pregnant women. WHO urges affected countries to identify all cases and contacts to control the outbreak and interrupt its spread.



Overall, oil prices were boosted by falling inventories and rising demand, standing at the 120 mark; Iran's decision to shut down the 2 monitoring equipment of the International Atomic Energy Agency in the Iranian nuclear facility may reduce the possibility of Iranian crude oil returning to the market. Bulls help; but with strong bulls, we also need to be alert to the uncertain risk of virus spread. The number of Americans filing initial jobless claims for the week is closely watched.

At 8:11 GMT+8, U.S. crude oil is now at $122.30 a barrel.