EIA crude oil inventories fell less than expected, and U.S. oil fell close to $1 in the short-term

In the New York session on Wednesday (May 25), at GMT+8 22:30, data released by the U.S. EIA showed that the U.S. commercial crude oil inventories excluding strategic reserves fell less than expected in the week ended May 20, and refined oil inventories exceeded expectations. , gasoline inventories fell less than expected. After the EIA data was released, U.S. crude oil prices fell close to $1 in the short-term.

EIA crude oil inventories fall less than expected

Specific data show that the change in U.S. EIA crude oil inventories in the week ended May 20 actually announced a decrease of 1.019 million barrels, an expected decrease of 6.9 million barrels, and a decrease of 3.394 million barrels from the previous value.

In addition, the U.S. EIA gasoline inventories actually announced a decrease of 482,000 barrels in the week ended May 20, an expected decrease of 4.1 million barrels, and the previous value decreased by 4.779 million barrels; the U.S. EIA refined oil inventories actually announced an increase of 1.657 million barrels in the week ended May 20 barrels, an increase of 90 barrels is expected, and the previous value increased by 1.235 million barrels.

U.S. crude exports rose by 821,000 bpd to 4.341 million bpd last week, the EIA report showed. The four-week average supply of U.S. crude oil products was 19.511 million barrels per day, an increase of 2.1% from the same period last year. U.S. domestic crude production fell by 00,000 barrels to 11.9 million barrels per day last week. U.S. Strategic Petroleum Reserve (SPR) inventories fell by 5.971 million barrels, or 1.11%, to 532 million barrels last week.

The EIA report showed that commercial crude oil excluding strategic reserves imported 6.486 million bpd last week, a decrease of 82,000 bpd from the previous week. Commercial crude oil inventories excluding strategic reserves fell 1.019 million barrels, or 0.2%, to 419.8 million barrels.

U.S. Midwest distillate inventories fell last week to their lowest level since December 2020, the EIA report showed. U.S. EIA refinery equipment utilization rose to its highest level since January 2020 in the week to May 20. U.S. Midwest distillate inventories fell last week to their lowest level since December 2020.

The EIA report showed that the U.S. EIA Strategic Petroleum Reserve inventory in the week to May 20 was the lowest since the week of September 4, 1987. U.S. EIA refined oil inventories for the week to May 20 recorded the largest increase since the week to January 7, 2022. U.S. crude oil exports in the week to May 20 were the highest since the week to March 13, 2020.

Institutional Commentary on U.S. crude oil inventories at EIA Cushing, Oklahoma for the week to May 20: Crude oil inventories in Cushing, Oklahoma have resumed their decline, falling for the third consecutive week, falling below 25 million barrels again. Many traders believe Cushing's critical level could be around 22 million barrels, so it will be closely watched in the first few months of the summer.

Analysts pointed out that the oil market is still torn between fears of a recession on the one hand and tight supplies on the other, especially for petroleum products, and the prospect of higher U.S. gasoline demand during the summer driving season.


U.S. crude oil prices 5-minute chart showing

Rising U.S. fuel demand leads to tight supply

Peak driving season in the U.S. traditionally begins on Memorial Day in late May and ends on Labor Day in September. Despite concerns that soaring fuel prices could dent demand, mobile data from TomTom and Google have climbed in recent weeks, showing more and more people are driving across the U.S.

Gas prices are more than $4 a gallon in nearly every state except Georgia, Kansas and Oklahoma, according to the AAA. The AAA said the rise in the national average was largely due to the high cost of crude oil, which hovered around $110 a barrel.

The analysis said: With the national (gasoline) average price approaching $4.50 a gallon, new records are being set almost every day. While gains may start to slow in the next few days, we don't have much reason to be optimistic that we'll see prices plummet soon. Oil prices were supported as the gasoline market was strong ahead of peak U.S. driving and supplies remained tight, with refineries typically operating at high capacity to meet U.S. driver demand.

Davos Forum Focuses on Russia-Ukraine Conflict, Global Economic Slowdown

According to foreign media reports on May 23, the annual meeting of the World Economic Forum opened in Davos, Switzerland on Monday. Thousands of business executives, government officials and other important figures gathered at the venue to exchange ideas. Klaus Schwab, founder and executive chairman of the World Economic Forum, said the Russian-Ukrainian conflict, climate change and the global economy were key issues to be discussed at the annual meeting.

In his welcome speech, Schwab said the Russian-Ukrainian conflict "is a turning point in history that will reshape our political and economic landscape in the coming years." Climate change and protecting nature are pressing issues, and concerns about high inflation will affect how the future of the global economy is viewed. He pointed to concerns about falling into poverty and dying from starvation.

International Energy Agency Administrator Fatih Birol said during a panel discussion on energy issues that he hoped that countries and investors would not choose to increase investment in fossil fuels because of the impact of the Russian-Ukrainian conflict. The report mentioned that Russia is an important supplier of oil and natural gas. After the outbreak of the Russia-Ukraine conflict, many European countries had to rush to reduce their energy dependence on Russia.

Birol said that in response to the energy shock from the conflict, there should be an increase in the supply of oil and gas to the market, but that does not mean that there should be a new round of large-scale long-term investment in fossil fuels. He also said that energy efficiency should be improved and that this winter Europe should even consider turning down the heaters by a few degrees, which would help secure energy supplies.

Ukrainian President Volodymyr Zelensky called for more weapons to Ukraine and "maximum" sanctions on Russia. In addition to Zelensky's speech, Ukraine also sent a large delegation to the Davos site to garner support from Western countries.

Russia's crude oil exports to Italy quadruple from before sanctions

Russia's crude exports to Italy in May were four times higher than in February, data showed, an unintended consequence of Western sanctions on Russia. Italy imported about 450,000 barrels a day of Russian crude this month, the most since 2013. Italy is on the verge of overtaking the Netherlands as the EU's largest importer of Russian seaborne crude oil.

The EU is pushing for a blanket ban on Russian oil imports by the end of this year, but member states have yet to reach an agreement. While sanctions imposed by the West on Russia in the wake of the Ukraine war have targeted much of its economic and financial sector, the energy sector has been largely spared the outright ban.

Still, many Western companies are cutting commercial ties with Russia's energy sector due to sweeping sanctions. This so-called "self-sanction" has led to a surge in Italian crude oil imports from Russia.

Before the Ukraine war, Russian crude accounted for 30% of the refinery's crude supply, which was owned by Moscow-based Lukoil. But that share has risen to 100% as Italian banks stopped extending credit to Lukoil (though the company was not sanctioned), forcing the refiner to rely on its parent company's oil.

European Commission President Von der Leyen backs purchase of Russian crude

According to Russian media reports on the 24th, European Commission President von der Leyen said that despite commitments to completely get rid of Russia's energy dependence, European Union countries are continuing to buy Russian oil, citing the reasoning to prevent Russia from selling crude oil to other countries at higher prices. Von der Leyen said in the interview that the EU's long-term goal is to stop buying Russian fossil fuels and replace them with renewable energy or liquefied natural gas supplied by the United States. She said Russian President Vladimir Putin had made a mistake in ordering the special military operation against Ukraine because he had "lost his best customer - the European Union".

Von der Leyen said the EU had to find the right balance between sanctions that hurt Putin and not hurt itself too much in the process. If we cut off the oil supply immediately from today, Putin might be able to sell the oil that is not sold to the EU on the world market, the price will go up, then he will sell it at a higher price and get the war money.

Von der Leyen said the rest of the world must join the United States and its allies in blocking Russia. So far, a large part of the global economy, including major energy consumers such as India, has refused to support Western anti-Russian sanctions, the report said. After the outbreak of the Russian-Ukrainian military conflict, Western countries have adopted a series of economic sanctions against Russia. EU member states have agreed to cut imports of Russian coal and crude oil, but as the bloc discusses a sixth round of sanctions against Russia, hard-to-replace pipeline gas remains an obstacle to finalizing the package.

Expectations of further Fed rate hikes support dollar, pressure oil prices

A few days ago, the Federal Reserve pledged to keep raising interest rates until there is clear and convincing evidence that inflation is receding. This comes as Fed official George expects the policy rate to be close to 2% by August.

Kansas Fed President Esther George said on Monday she expects the central bank to raise its target rate to around 2 percent by August, and further action will depend on the impact of supply and demand on inflation. "Fed policymakers have emphasized moving quickly to restore price stability," George said. "I expect that further rate hikes could bring the federal funds rate to around 2 percent by August, which is a significant rate of change in policy setting, and inflation Evidence of a clear deceleration will provide a basis for further tightening of the policy.

The Fed has been raising interest rates to curb inflation at 40-year highs, raising short-term borrowing costs from near zero to a range of 0.75%-1% this year.

Fed Chairman Jerome Powell has already signaled that the central bank will raise rates by a full percentage point at its two meetings in June and July. Since then, the central bank's actions have become a key issue of debate among its policymakers. Powell was officially sworn in on Monday for a second four-year term; he was also sworn in as a new vice-chairman, Brainard, and two new directors, Jefferson and Cook.

George used much of her prepared remarks to outline the intersecting factors affecting the U.S. economy that make it so difficult to judge what will happen to inflation: For example, Russia's war and China's Covid-19 lockdown could hit global growth, reduce Inflationary pressures may also further disrupt world production capacity and increase inflationary pressures.

George said the role of the central bank is to prevent persistent imbalances from sparking inflation and to lift inflation expectations. Fed rate hikes can only reduce demand and cannot affect supply factors that also weigh heavily on inflation, and the evolution of its efforts, along with other factors, will affect the course of monetary policy, requiring constant and careful monitoring.

UAE crude returns to Europe after two years

The United Arab Emirates has made a rare start of crude shipments to Europe as Europe is also negotiating a ban on Russian oil.

The tanker Spirit of Moscow, employed by Total Energy's shipping arm, was heading for Rotterdam, the Netherlands, with about 1 million barrels of Emirati crude on board, according to the data. The same company also loaded Emirati crude on a supertanker bound for Egypt. It is also very likely that the crude oil will end up in Europe. Crude oil destined for Egypt may enter a pipeline through the North African country, where it will be received at the Mediterranean port of Sidi Kil.

Tracking data shows that the last shipment of crude from the UAE to Europe was delivered in May 2020, at a time when the Covid-19 pandemic was upending the global crude market. Before the escalation of the Russian-Ukrainian conflict, Russia was Europe's largest external supplier of crude oil, but many of the cargoes that were once destined for the continent are now destined for Asia.

Compared with Saudi Arabia's onlooker attitude, the UAE, as OPEC's third largest oil producer, often shows some "caution". It was the first OPEC member to call for increased production. The UAE's second crude shipment to Europe after a two-year hiatus may be just the beginning. There are reports that three grades of crude oil from Abu Dhabi, the United Arab Emirates, will continue to be shipped to Europe in the next few months to replace Russian crude oil, which may crowd out the UAE's crude oil exports to Asia, and may also lead to the exchange of Russian oil and Arab oil in part of the market. .