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Market News Crude oil trading reminder: tightening supply helps oil prices rise, wary of escalating geopolitical tensions

Crude oil trading reminder: tightening supply helps oil prices rise, wary of escalating geopolitical tensions

In the Asian session on May 13, U.S. oil is now at $106.81 per barrel; oil prices rose nearly 1% on Thursday, the International Energy Agency (IEA) emphasized the tight situation in global fuel inventories, but the European Union hinted that member states may not be able to agree on Russian oil. The ban has been agreed to limit the rise in oil prices; it is necessary to be alert to various rare virus-related news.

2022-05-13
10283
In Asian hours on Friday (May 13), U.S. oil is now at $106.81 per barrel; oil prices rose nearly 1% on Thursday, the International Energy Agency (IEA) emphasized the tight situation in global fuel inventories, but the European Union hinted that member states may not be able to Agreed on Russia's oil ban, capping oil price gains.



During the day, the focus will be on the preliminary reading of the University of Michigan's consumer confidence index in May, and the Fed's Kashkari's speech on energy and inflation.

Bullish factors affecting oil prices


[International Energy Agency says global observed oil inventories fell by 45 million barrels in March]

The International Energy Agency (IEA) said on Thursday that a reduction in Russian production caused by the conflict between Russia and Ukraine will not lead to a world oil shortage as supplies rise elsewhere and demand is curbed by the coronavirus lockdown.

In its monthly oil report, the IEA said, “Over time, a steady rise in Middle East OPEC+ and U.S. production, coupled with slower demand growth, is expected to offset severe supply shortages from worsening supply disruptions in Russia.

Slowing oil exports and lower domestic demand following sanctions meant about 1 million bpd of Russian oil was shut down last month, about 500,000 bpd less than the IEA forecast last month. The IEA sees the figure rising to 1.6 million bpd in May, then to 2 million bpd in June, and to nearly 3 million from July if sanctions prevent further purchases or expansion barrels/day.


However, the IEA said Russia's exports in April rebounded by 620,000 bpd from the previous month to 8.1 million bpd, returning to the January-February average as Russia's supply is mainly diverted from the United States and Europe to India. .

"The news about oil production is starting to dominate the crude oil market. It can't be simply ignored," said Rebecca Babin, senior energy trader at CIBC Private Wealth Management.

U.S. distillate inventories fell last week to their lowest levels since 2005, and gasoline inventories fell for a sixth straight week, the U.S. Energy Information Administration said. Diesel inventories in OECD countries fell to their lowest since 2008.

[If Finland and Sweden join NATO, Russia will have to take measures to eliminate possible threats]

On the 12th local time, the Russian Ministry of Foreign Affairs stated that the statement of the Finnish leadership on supporting the country's accession to NATO is a drastic change in the country's foreign policy, and Russia will respond according to the situation. The Russian Foreign Ministry also said that Russia will have to take technical military or other means to eliminate the threat posed by Finland and Sweden joining NATO.

Negative factors affecting oil prices


[OPEC cuts global oil demand growth forecast for 2022]

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday lowered its forecast for global oil demand growth in 2022 for a second straight month, citing the fallout from the Russia-Ukraine conflict, rising inflation and the spread of the virus.

OPEC's monthly report predicts that the growth rate of global crude oil demand in 2022 is expected to be 3.36 million barrels per day (previously 3.67 million barrels per day), and the forecast for Russia's oil production in 2022 is lowered by 360,000 barrels per day, and the global demand for OPEC crude oil in 2022 will be reduced by 360,000 barrels per day. The forecast was raised by 153,000 bpd to 28.65 million bpd, lagging behind the increase promised in the OPEC+ deal.


[EU begins to consider delaying oil sanctions on Russia]

On Thursday, May 12, local time, some EU member states believed it was time to consider delaying the implementation of the ban on Russian oil imports. Given the EU's inability to persuade Hungary, the countries concerned need to move forward with the remaining sanctions first. Hungary reiterated its public stance on Wednesday, with Hungarian Foreign Minister Sialto saying that the embargo on Russian oil should only target maritime transport routes and that onshore pipeline transport should be exempt.

According to EU diplomats, governments still hope to reach an agreement on the entire package, including a phased oil ban, when EU foreign ministers meet in Brussels next Monday. The diplomats added that the idea of delaying action against Russian oil was gaining support, which Hungary said would do too much damage to its economy. But another diplomat said other countries feared that it would be a sign of weakness to lift the measure now.

Hungarian Prime Minister Viktor Orban had suggested that any oil ban would need to be discussed by EU leaders at the next summit scheduled for the end of May. In addition, European Commission President Ursula von der Leyen had planned a video call earlier this week with Orban and Hungarian regional leaders to discuss a possible compromise, which has also been postponed and has not been rescheduled.


[The S&P 500 is just a stone's throw away from confirming that it has entered a bear market]

U.S. stocks ended slightly lower on Thursday, tugging back and forth between flat sessions, as signs of peaking inflation mingled with concerns that inflation could remain elevated, prompting more aggressive tightening by the Federal Reserve. The three major U.S. stock indexes all fluctuated up and down the previous day's closing points. The S&P 500 index hit a record high on January 3, and it is now just a stone's throw away from confirming that it has entered a bear market. At the close, the S&P and Dow closed slightly lower, but the Nasdaq edged up. Stock indexes have been volatile in recent sessions, often reversing an initial rally or sell-off at the close.

Ryan Detrick, chief market strategist at LPL Financial, said, "Such a 2% swing of this magnitude is extremely rare, and such a large swing in such a short period of time shows that investor psychology is very fragile, and there is continued concern about inflation, which seems to be It has peaked, but remains stubbornly high, continues to worry investors, and pushes the S&P to the brink of a bear market.”

Detrick added that the move "is widely expected to pave the way for the Fed to continue its fight against 40-year high inflation, with more rate hikes likely this year."

[20 European gas buyers have opened ruble accounts]

According to a report by Bloomberg on the 12th, another 10 European gas buyers have opened ruble accounts in Gazprom, so that they can buy natural gas in rubles as required by Russia. So far, the number of European companies opening ruble accounts has doubled from the end of April to 20.

In addition to the 20 European companies that have opened accounts, 14 other companies have requested documents needed to open accounts, the report quoted people familiar with the matter as saying, without naming those companies.

Italian Prime Minister Mario Draghi said at a news conference in Washington on the 11th that Italy and Germany are the main importers of Russian natural gas, and European companies have not violated sanctions by paying Russian natural gas in rubles.

[Rare "tomato flu" outbreak in Kerala, India]

According to "India Today", "The Times of India" and other Indian media reported on the 11th, after a rare viral disease called "tomato flu" or "tomato fever" broke out, Kerala, India issued a high warning that day. . More than 80 children under the age of five have been reported to have contracted the disease in the state.



Overall, tight global fuel inventories are positive for oil prices. Although the EU may postpone the ban on oil imports from Russia, it is necessary to be alert to the risk of rising geopolitical tensions and to various rare virus-related news.

At 6:52 GMT+8, U.S. crude oil is now at $106.81 a barrel.
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