EIA crude oil inventories fell more than expected, U.S. oil rebounded by 0.5 US dollars from daily lows in the short-term

During the New York session on Wednesday (September 1), GMT+8 22:30, data released by the US EIA showed that as of August 27, the US commercial crude oil inventories excluding strategic reserves fell more than expected, and refined oil inventories fell more than expected. Expected, gasoline inventories increased more than expected. After the release of the EIA data, US crude oil prices rebounded by 0.5 US dollars from the daily low in the short-term. Investors are currently paying close attention to the results of the OPEC meeting that is going on this week.

EIA crude oil inventories fell more than expected

Specific data show that the US EIA crude oil inventory changes in the week ended August 27 actually announced a decrease of 7.169 million barrels, which is expected to decrease by 2.927 million barrels, and the previous value decreased by 2.98 million barrels.

In addition, the US EIA gasoline inventory actually announced an increase of 1.29 million barrels for the week ending August 27, which is expected to decrease by 1.367 million barrels, and the previous value decreased by 2.241 million barrels; the US EIA refined oil inventory for the week ended August 27 actually announced a decrease of 1.732 million barrels. Barrels, it is expected to decrease by 809,000 barrels, and the previous value will increase by 645,000 barrels.

The EIA report shows that US crude oil exports increased by 228,000 barrels per day to 3.04 million barrels per day last week. Last week, US domestic crude oil production increased by 100,000 barrels to 11.5 million barrels per day. In addition to the strategic reserves of commercial crude oil imported 6.34 million barrels per day last week, an increase of 183,000 barrels per day from the previous week.

The EIA report shows that commercial crude oil inventories excluding strategic reserves decreased by 7.169 million barrels to 425.4 million barrels, a decrease of 1.7%. The U.S. commercial crude oil inventories excluding strategic reserves from the week to August 27 were the lowest since the week of September 27, 2019.

The EIA report shows that the U.S. EIA crude oil inventory fell by 7.169 million barrels in the week to August 27, the largest drop since July 9, 2021. The four-week average supply of US crude oil products was 21.403 million barrels per day, an increase of 17.1% over the same period last year. The U.S. domestic crude oil production for the week to August 27 was the highest since the week of May 15, 2020.

The EIA report shows that crude oil inventories along the US Gulf Coast fell to the lowest level since February 2020 last week. In the week from the US to August 27, the increase in EIA gasoline inventories was the largest since the week of June 25, 2021.


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Hurricane Ida briefly affected the production of oil and gas platforms in the U.S. Gulf of Mexico earlier this week

U.S. oil and gas exploration and exploitation companies in the Gulf of Mexico and coastal refining and chemical plants have ceased production in preparation for Hurricane Ida.

According to the National Hurricane Center, Hurricane Ida made landfall near New Orleans early this week. According to the Bureau of Safety and Environmental Enforcement, 59% of crude oil production capacity (equivalent to approximately 1.06 million barrels per day) and 49% of natural gas production capacity have been closed since last week. The refining and chemical plants along the Mississippi River, with a refining capacity of approximately 1.25 million barrels per day, have been closed or their operating rates have been reduced.

Oil companies that shut down oil and gas production capacity include: BP, Shell, Statoil, BHP Billiton, Murphy Oil, Chevron, and Exxon Mobil. Companies that stopped or reduced production at refineries include: Phillips 66, Exxon Mobil, Shell, and Marathon.

It is also reported that on the 29th local time, US President Biden announced a major disaster in Louisiana and ordered assistance to all levels affected by Hurricane Ada.

The White House said that emergency assistance includes providing temporary housing and housing repair subsidies, micro loans and other recovery measures to help companies and individuals recover from the disaster. Earlier that day, Louisiana Governor John Edwards asked Biden to issue a major disaster statement.

According to data from the data tracking website PowerOutage.US, affected by Hurricane Ida, as of the early 30th local time, more than 1 million users in Louisiana had power outages, compared with 43,000 in Mississippi.

It is also reported that officials from the US Federal Energy Department said on August 31, local time that more than 1 million households and businesses in Louisiana and Mississippi that were previously affected by Hurricane Ada would need at least three days to recover. Electricity supply, because it is difficult for regional electricity suppliers to calculate the damage caused by Hurricane Ida.

However, the power supply company Anteji said on the 31st that they have begun to restore power to residents and businesses, and have now restored power to 85,000 homes and businesses in the two states of Louisiana and Mississippi.

In addition, the Waterford nuclear power plant in New Orleans was also damaged by strong winds and rainfall. According to Anteji, the nuclear reactor has not been affected and there are no safety hazards.

Worries about the mutated virus epidemic still pressure oil prices

The epidemic crisis in the United States is still and intensified, putting the medical system under tremendous pressure. According to the latest epidemic report released by the Centers for Disease Control and Prevention, the number of new confirmed cases of new crowns in the United States reached 1 million during August 22-28, the first time since January this year. The epidemic situation in almost every state is intensifying, and The daily detection scale is only two-thirds of the peak of last winter.

The more serious problem is that as the epidemic continues to spread, the US health care system is facing tremendous pressure. According to data from the U.S. Department of Health and Human Services, the utilization rate of hospital beds exceeds 78%, and the number of beds occupied by patients with new crowns exceeds 100,000 for the first time since January 30. Among them, Florida is one of the hardest-hit areas, where 85% of hospital beds and 95% of ICU beds are in use.

It is worth noting that the number of children hospitalized for COVID-19 in the United States has also reached a new high. The U.S. Department of Health and Human Services stated that there are currently more than 2,000 children who have been diagnosed or suspected of being infected with COVID-19, accounting for 2.3% of the country’s COVID-19 hospitalizations. In addition, a total of at least 90,000 students in 19 states in the United States have been quarantined, including those infected and close contacts who have tested positive for the new crown virus.

At the same time as the medical system is strained, the death rate of the new crown in the United States is showing an upward trend. According to data released by Johns Hopkins University on the 27th, in the past week, the number of deaths from the new crown in 14 states in the United States has increased by more than 50%, and the death toll in 28 states has increased by at least 10%.

Among them, Alabama is the "severely hit area" of the new crown epidemic in the United States. Local health official Scott Harris said that the number of hospitalizations in the state continues to rise, and the number of new crown deaths has also surged because there is no place to store it. For the corpse, health officials had to use a refrigerated trailer to house the corpse. This is the first emergency measure of this kind since the epidemic.

Even more worrying is that the death rate of the new crown in the United States may not have peaked. According to the Associated Press report on the 26th, the University of Washington's new crown epidemic model shows that the daily death toll is expected to rise to nearly 1,400 by mid-September. , And then slowly drop. From now to December 1, it is estimated that there will be 98,000 new deaths, and the total death toll will be close to 730,000.

The coming winter may make the US epidemic more complicated. On the one hand, the new crown epidemic is still raging, and on the other hand, the flu season is about to hit. According to data from the US Centers for Disease Control and Prevention (CDC), generally speaking, 9 million to 45 million people are infected with influenza every year in the United States during the flu season. American medical experts predict that this year may face a medium-scale flu epidemic.

The complex epidemic has caused more and more Americans to have a decline in their confidence in economic recovery. According to the latest public opinion survey by Gallup Consulting, 60% of respondents believe that the US economy is deteriorating and they are worried about the prospects for economic recovery.

OPEC+ expects that the global oil market will still be in short supply this year, but oversupply will reappear next year

The Organization of the Petroleum Exporting Countries (OPEC) and its allies predict that despite the organization's gradual recovery of production, the global oil market will continue to tighten this year, but it will become oversupply again by 2022.

These data were submitted to the organization's joint technical committee on Tuesday, convincing OPEC and its partner countries that they can increase production in October as generally expected.

OPEC+ data shows that even if it advances its plan to increase production by 400,000 barrels per day per month, crude oil inventories will continue to decline for the rest of this year. In the next four months, the average decline in global inventories is expected to be 825,000 barrels per day.

But the data also reveals that as Saudi Arabia and its partner countries gradually resume production, they will face new challenges in 2022. It is expected that the market will become oversupply again in January next year, and this trend will be maintained throughout 2022.

A person familiar with the data said that in 2022, global supply exceeds demand by an average of 2.5 million barrels per day, increasing inventories by 913 million barrels.

The forecast assumes that OPEC+ will fully recover nearly 6 million barrels per day of production capacity that has not yet been activated. This scenario may be difficult to achieve because many countries may not be able to fully meet the standards.

OPEC+ Conference Probably Continues to Promote the Oil Production Increase Plan

The 20th OPEC and non-OPEC ministerial meeting was held this Wednesday (September 1). Earlier this month, due to the resurgence of the epidemic threatening oil demand in China and the United States, oil prices fell sharply, making OPEC+ production increase plans questioned, but then rebounded, giving more breathing room. In view of this, industry analysts say that OPEC+ is likely to continue to promote the oil production increase plan, but it does not rule out that there will be accidents.

Some analysts pointed out that the best option OPEC+ may make on Wednesday is to maintain the agreement reached last month.

Rohan Reddy, an analyst at Global X, a global exchange-traded fund (ETF) provider, said that one of OPEC+’s biggest concerns is the new crown delta variant and its impact on developed and emerging economies. But as vaccination progresses, the delta variant is likely to eventually be brought under control, which will lead to higher energy requirements.

Reddy also said that other countries, including the United States, may increase oil production next year, and the Fed is considering reducing bond purchase plans as soon as this year, which may strengthen the U.S. dollar and put pressure on U.S. dollar-denominated oil prices.

However, he also pointed out that despite some concerns, OPEC+'s policies are very pragmatic, so these concerns will be weighed in 2021. OPEC+ will hold a meeting on September 1 to review its production policy. The organization "may consider all developments before making a decision."

Reddy still believes that OPEC+ "will still gradually lift the oil production cuts implemented last year."

Ed Morse, Head of Commodity Research at Citigroup, said: “The uncertainty about the recovery of the world economy and China’s growth has largely disappeared. There is ample evidence that the bottom of oil prices is temporary. If the recovery continues, OPEC+ may Stick to the plan to increase production."

Of the 22 traders, analysts and refiners surveyed by the media, 17 expected that the OPEC+ meeting on Wednesday would not change the schedule for increasing production.

U.S. shale oil producers are no longer the main concern of OPEC, providing reasons for OPEC to increase production

The loss of market share by US shale oil producers is no longer a major concern for OPEC this time. US Dallas Fed President Kaplan pointed out that this provides some reasons for OPEC "not to increase production as much as possible."

Kaplan said on Thursday that US shale oil producers have been swing suppliers in the oil market in the past, but the situation may be different now, and now the swing suppliers are more likely to be OPEC. He pointed out that depending on OPEC's decision, there may be a period of supply shortage in the market.

Kaplan said that OPEC’s goal is to "maximize cash flow, while at the same time, it must not allow oil prices to rise too high, thereby stimulating U.S. shale oil producers to increase production. He said OPEC may see U.S. shale oil." Oil producers are “very slow in increasing production significantly.” Some companies have stated that they will limit oil production and are unwilling to use cash flow to invest in new drilling. On the contrary, “it is more likely to return cash to shareholders and increase dividends and stock returns. purchase. "

"OPEC+ may be extremely vigilant about high-frequency demand signals at the moment," said Matt Smith, Head of Commodity Research at ClipperData. "On the demand side, red flags have been issued in parts of Asia, and this has been happening for some time. If OPEC+ sees continued weakening of demand for crude oil, they may press the pause button to increase production."

The International Energy Agency, IEA, previously sharply lowered its crude oil demand forecast for the rest of the year and warned that there will be a new round of energy surplus in 2022.

Kuwait's Oil Minister Mohammad Abdulatif al-Fares recently stated that OPEC+ may consider adjusting the production quota level reached last month when it meets this week. He believes that the raging delta variant has weakened the economic recovery of some countries and affected the growth of crude oil demand. Therefore, OPEC+ will consider whether the relevant limit level is appropriate and does not rule out canceling the decision to increase production.

Regarding US President Biden's request for OPEC+ to increase production to stabilize oil prices, al-Fares believes that OPEC+ holds a different view.

Earlier this month, Biden said that the United States has made it clear to OPEC that as the global economy recovers, the production cuts implemented during the epidemic should be reversed, thereby reducing consumer prices.

Goldman Sachs believes that oil prices will reach new highs after the recent plunge

The U.S. Food and Drug Administration (FDA) fully approved Pfizer/BioNTech's new crown vaccine, inspiring investors' hope that the U.S. new crown vaccine coverage rate may increase, which in turn will increase fuel demand.

US health officials hope that this action will convince unvaccinated Americans that the vaccine is safe and effective, and hope that this will also prompt more state and local governments and private employers to mandate vaccination.

Edward Moya, a senior analyst at OANDA, said that now that the FDA has sent a completely clear signal, the hesitation of some minority groups on vaccines may end. As many companies and government agencies may implement vaccine programs, they will return to the office in the fall. Travel should pick up sharply.

In addition, the same boost to oil prices is that the survey showed that US crude oil and gasoline inventories may have fallen last week, while distillate oil inventories are expected to increase. As fuel demand rebounded, Indian oil refineries' crude oil processing volume in July rebounded to their highest value in three months, which supported oil prices.

Rabobank’s Ryan Fitzmaurice pointed out that this wave of decline in oil prices has pulled it from a post-coronavirus high to close to a bear market: just as short-term momentum and some trend signals turned bearish.

In addition, if oil prices continue to weaken, the medium-term momentum signal may also turn from "long" to "short" in the next few days, which may trigger another wave of aggressive systemic selling before the pressure subsides.

Therefore, Rabo’s strategists said: We attribute a large part of the recent drop in oil prices to the herding behavior of systemic funds, rather than any substantial changes in the fundamental outlook of the oil market.

Jeffrey Currie, head of commodities at Goldman Sachs, further elaborated on this, including fundamental factors. He wrote that in the past nine months, commodities have been driven by strong macro trends. Throughout June, there was a significant cross-correlation between commodities, which pushed the entire commodity market higher.

Goldman Sachs pointed out that recent macro trends-the lifting of reinflation and the spread of Delta mutant strains-have created resistance and pushed all markets lower. In addition, major markets are still in deficit, and oil and base metal inventories continue to fall sharply. Although "the growth peak is clearly over, Goldman Sachs strategists once again emphasized that the driving factor for commodities is the level of demand, not the growth rate.

Goldman Sachs' Currie then observed the technical side and pointed out that in combination with low liquidity and new short positions to automatically measure investors, market volatility is rapid and huge.

Goldman Sachs said that although liquidity may remain low and the current trend is not good for us, as we move into the fall, the micro-factors of the steady tightening of the fundamentals of commodities will overwhelm these macro-trends and push oil and base metals. Wait for many markets to reach new highs in this cycle.