EIA crude oil inventories increased more than expected, while U.S. oil fell slightly by US$0.2 in the short term

During the New York session on Wednesday (November 3), GMT+8 22:30, data released by the US EIA showed that as of the week of October 29, the US commercial crude oil inventories excluding strategic reserves increased more than expected, and refined oil inventories increased more than expected. Expected, gasoline inventories fell more than expected. After the release of the EIA data, US crude oil prices fell slightly by $0.2 in the short term.

EIA crude oil inventories increase more than expected

Specific data show that the US EIA crude oil inventory changes in the week ended October 29 actually announced an increase of 3.29 million barrels, an expected increase of 2.25 million barrels, and an increase of 4.268 million barrels from the previous value.

In addition, the U.S. actually announced a decrease of 1.488 million barrels of EIA gasoline inventories for the week ending October 29, and an expected decrease of 1.25 million barrels, a decrease of 1.993 million barrels from the previous value; the United States actually announced an increase of 2.16 million EIA refined oil inventories for the week ending October 29 Barrels, it is expected to decrease by 1.25 million barrels, and the previous value will decrease by 432,000 barrels.

The EIA report shows that US crude oil exports increased by 138,000 barrels per day to 2.925 million barrels per day last week. Last week, US domestic crude oil production increased by 200,000 barrels to 11.5 million barrels per day. The four-week average supply of US crude oil products was 20.384 million barrels per day, an increase of 7.9% over the same period last year.

The EIA report shows that commercial crude oil inventories excluding strategic reserves increased by 3.29 million barrels to 434.1 million barrels, an increase of 0.8%. In addition to the strategic reserves, the import of commercial crude oil last week was 6.172 million barrels per day, a decrease of 82,000 barrels per day from the previous week.

The EIA report shows that the U.S. commercial crude oil inventories excluding strategic reserves from the week of October 29 are the highest since the week of August 13, 2021. From the US to October 29, EIA refined oil inventories increased the most since the week of July 9, 2021. U.S. gasoline inventories fell to the lowest level since November 2017.


U.S. crude oil price 5 minutes chart display

OPEC+ is expected to increase production as originally planned this week, ignoring the appeals of major oil-consuming countries

Although the United States, Japan and India have urged OPEC+ to increase production at a faster rate, all 21 interviewees surveyed believe that OPEC+ will increase production by 400,000 barrels per day.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies are expected to stick to a moderate increase in production this week, ignoring calls from oil-consuming countries to increase their efforts to curb soaring oil prices.

The 21 interviewees surveyed expect that OPEC and its partner Congress at the November 4 meeting approved the planned increase in production by 400,000 barrels per day in December, and will continue to gradually resume production that was suspended during the epidemic.

US President Joe Biden has called on OPEC+'s major economies to increase production at a faster rate. Oil prices have reached their highest level in seven years, posing an inflationary challenge to the global economic recovery. Brent crude oil is approaching $85/barrel, which is boosted by the global energy shortage centered on the natural gas market.

However, Saudi Arabia and OPEC+, which has 23 member states, have resisted this. From Kuwait to Kazakhstan, various oil-producing countries have rarely commented a few days ago, declaring that they need to be cautious.

Several OPEC+ representatives have privately stated that they are expected to maintain their original production increase plans, and Russia and the UAE, which are usually keen on rapidly increasing exports, have not yet publicly stated their positions.

After several countries launched diplomatic operations in private, Biden said on Sunday that he was considering actions, but he would not elaborate on exactly why. Royal Capital Markets believes that the US government is ready to release emergency oil reserves.

On Tuesday, Japan also began to complain. The country’s Minister of Economy, Trade and Industry Koichi Hagi urged OPEC+ to hold discussions to stabilize the market. He added that the Japanese government is in contact with the Paris-based International Energy Agency (IEA).

The survey was conducted on analysts, traders, brokers and refineries in Europe, the United States and Asia. Given the pressure from the White House and other major oil-consuming countries such as India, we certainly cannot rule out the possibility that Saudi Arabia will approve additional production increases beyond expectations.

Helima Croft, head of commodity strategy at Royal Bank of Canada, said. But so far, OPEC seems to still intend to maintain the original plan.

This round of global energy crisis has eased, limiting oil prices

Since the summer of this year, the soaring global energy prices have made people worry about the soaring heating prices this winter. However, just as people’s extremely anxious "winter" is approaching, the global energy market has unexpectedly fallen sharply in recent days...

As the source of the global energy crisis, the current price changes in the European energy market are still the most representative: ICE European benchmark coal futures, which hit a high of $193/metric ton in early October, have fallen by more than 50%. The drop reached 24% within a week.

Local natural gas prices have also fallen sharply. The European benchmark TTF Dutch natural gas futures price has fallen sharply to around 65 euros, which is almost "halved" from the historical high in early October.

A futures investor said that the round of bullish commodity market driven by the rise in global energy prices seems to be coming to an end, and we did not expect it to come so soon. In fact, as far as domestic investors are concerned, with the recent successive voices of policymakers, the decline in domestic thermal coal and other futures prices is nothing new.

Since October 19, the main domestic thermal coal contract price has continued to fall, and 7 of the 9 trading days have hit the lower limit. The main contract price of thermal coal has fallen from the highest level of 1982.0 yuan/ton during the year to less than 900 yuan, a drop of nearly 55%.

At the most tense stage of this year's energy crisis, the global energy market once staged a scene of European and Asian buyers competing for US LNG. Today, the US energy market is also experiencing "cooling."

The price of natural gas in the United States has fallen sharply in the past week, with the latest trade at $5.26 per million British thermal units, which is significantly lower than the seven-year high of nearly $6.5 reached earlier last month. Robert Yawger, US Energy Director of Mizuho Securities, said that the initial jump in natural gas prices may be just a panic caused by headlines, and speculators like price jumps. The bank predicts that the price will stabilize below $5 before the end of the quarter.

The National Development and Reform Commission’s WeChat official account recently announced that in order to implement the decision and deployment of the Party Central Committee and the State Council on ensuring coal supply and price stabilization and ensuring the people’s warmth through the winter, the Development and Reform Commission and relevant departments have taken multiple measures to promote coal mines to tap potential and increase production. All parties involved in production, transportation and demand have made joint efforts to increase market supply. The work of ensuring coal supply and price stabilization has achieved initial results, and the national coal supply and demand situation has improved significantly.

The Danish Energy Trading Group stated in a recent report that China’s continuous increase in coal production has helped to promote the growing bearish sentiment in the (European coal futures) market. The decline of more than 30% in just two weeks reflects the extremely pessimistic signal has begun to dominate. market.

In the natural gas market, last week Russian President Vladimir Putin instructed Russian state-owned natural gas producers to complete the task of injecting gas into Russia's underground natural gas storage facilities before November 8, and then began to "increase the natural gas reserves of underground facilities in Austria and Germany." Russia’s commitment has undoubtedly helped to alleviate the upward pressure on the natural gas futures market, and is expected to help alleviate the European heating demand crisis in autumn and winter.

According to data released by Gazprom on its social homepage on Monday, according to preliminary statistics, Gazprom’s natural gas exports to non-CIS countries from January to October this year increased by 10.4% year-on-year to 158.8 billion cubic meters, close to history. The highest record. Among them, the volume of imported gas from Gazprom from Germany, Italy, Poland, Greece and Finland increased by 23.4%, 15.4%, 9.5%, 16.3% and 3.6% respectively from January to October this year.

Is the global energy crisis over? The analysis indicated that with Russia's statement, the most tense moment of the European natural gas market has passed. However, it is worth noting that despite Russia’s repeated commitments to supply more natural gas to Europe, Gazprom has not yet scheduled additional capacity to deliver natural gas to the European continent in November, that is, there is still uncertainty about when Russia will start large-scale gas supply to Europe. sex.

In addition, the recent fall in global energy prices has not only been promoted by the supply-side stabilizing reassuring comments, the relatively warm weather in the transition season of this year’s autumn and winter has also played a certain role, but when people enter winter in the next few months, they will be With the arrival of the gas peak, the test may only really come, and the subsequent acceleration of destocking may aggravate the contradiction between supply and demand.

John Kilduff, the founding partner of Again Capital, said that people are still very worried about whether the supply of natural gas is sufficient. The market remains sensitive to any predictions of lower temperatures.

It is worth noting that, unlike coal and natural gas prices that have fallen sharply or even cut in half recently, crude oil prices have yet to show any signs of falling from their high levels. Brent crude oil and U.S. WTI crude oil are currently above the $84 mark, which may also mean that the focus of the future energy market game is likely to focus on crude oil, the current defensive "king of commodities"!

Matthew Sherwood, a global economist at the Economist Intelligence Unit (EIU), pointed out that "the main factors affecting oil prices will continue to be related to energy tensions in Europe and the shift from natural gas to petroleum derivatives."

At the time of the energy crisis, the US oil giants did not expand production

At present, many large energy companies around the world have created the largest cash flow in many years. However, in the face of energy shortages this winter, it is best not to expect these companies to spend money on increasing oil and gas supplies in response to the crisis.

Exxon Mobil (XOM.US), Royal Dutch Shell (RDS.A.US) and Chevron (CVX.US) confirmed last week that they plan to spend most of their profits on stock repurchases and dividends. Although these companies will increase capital expenditures next year, this is based on an unusually low base in 2021 and within the framework established before the recent surge in fossil fuel prices.

This has changed considerably from the past situation when energy prices rose. For example, in the early 2010s, the rise of the US shale oil market and concerns about the shortage of fossil fuels prompted a significant increase in capital expenditures by energy companies. However, due to overproduction and lack of cost control, this boom ended in pain.

And this time, when company shareholders are tired of the low returns of the past 10 years and worry about the company’s major climate risks, large energy companies seem to be more willing to return cash to shareholders.

Stewart Glickman, an analyst at CFRA Research in New York, said: Not long ago, these companies were hit by the plunge in prices, so it's no surprise that they are a little bit shy about capital expenditures. In addition, at the moment, these companies seem to be trapped between two extreme groups-ESG and cash flow-hungry shareholders.

For producers, as long as they do not increase spending on fossil fuels, these two groups can be satisfied, but this is a bad sign for consumers who desperately need more supplies. Currently, Europe and Asia are competing for natural gas, which has pushed prices up to record levels, while the United States and India are asking OPEC+ to increase production.

In the face of skyrocketing energy prices, Chevron may be the best example of abandoning the "punch bowl" (referring to market frenzy). In the third quarter, Chevron created the largest free cash flow in its 142-year history, but the company plans to keep capital expenditures below 20% of pre-epidemic levels next year, while increasing stock buybacks. According to the company's chief financial officer Pierre Breber, its 2022 capital budget will be at the low end of the range of US$15 billion to US$17 billion, about 60% lower than the 2014 level.

Pierre Breber said in a conference call with analysts last Friday: "Over time, the vast majority of excess cash will be returned to shareholders in the form of higher dividends and buybacks."

At the same time, Exxon Mobil, which doubled its bet on fossil fuels until last year, is now more cautious about cash handling. Exxon Mobil announced an unexpected stock repurchase program last Friday, and locked long-term annual expenditures at a low level of $20 billion, a reduction of more than 30% from before the outbreak.

In addition, nearly 15% of ExxonMobil’s budget will be used for low-carbon investment, which is very different from the previous strategy. This may be the same as a few months ago, when activist investor Engine No. 1 persuaded investors to replace a quarter of the company. Related to the board members. CEO Darren Woods commented on this that clean energy spending "provides optionality and flexibility for our plans."

As for Shell, after Dan Loeb's Third Point LLC disclosed that it has taken a stake, the company is also facing pressure from activist investors. As a result, Shell has become more reluctant to invest in traditional oil businesses. Of the overall expenditure, less than half of the capital expenditure will be spent on oil, most of which will be spent on natural gas, renewable energy and electricity.

Shell CEO Ben Van Beurden said last week: "We will not double our investment in fossil fuels."

Biden pressures OPEC+ to increase production again

OPEC+ will hold its 22nd Ministerial Conference this Thursday to discuss oil policy. US President Biden continued to test pressure on OPEC+, asking it to curb high oil prices, and accused the organization of causing inflationary pressures in the United States.

Biden said: If you look at the price of natural gas and oil, you will find that it is the result of Russia or other OPEC member countries' refusal to increase oil production so far. Sooner or later we will see what happens in this regard.

OPEC+ is facing tremendous pressure. US Secretary of State Brinken held talks with UAE Foreign Minister Sheikh Abdullah bin Zayed on Tuesday and urged the country to increase oil production. Consumer countries such as Japan and India also hope that oil production can increase, otherwise an energy crisis may occur. Will cause damage to the economic recovery in Europe and Asia.

Due to the soaring domestic gasoline prices in the United States, Biden has brought increasing political risks. Biden called for OPEC+ to increase oil production at the G20 summit last week. However, Kuwait, Iraq, Algeria, Angola and Nigeria and other OPEC+ members have expressed their hope that OPEC+ will stick to its current plan to gradually increase production.

Biden said on Sunday that if major oil-producing countries choose not to increase oil production, he "will not disclose" what he and other leaders will do. US National Security Adviser Sullivan said that Biden had "extensive discussions" with other oil-consuming countries on possible measures, but Biden declined to say whether the United States and other countries are considering a coordinated release of oil reserves.

However, Biden’s attempt to pressure OPEC+ to increase oil production has been criticized by activists who believe that Biden is still pushing for higher oil production while attending a meeting aimed at discussing how to transition to clean fuels. Is hypocritical. Biden said that high oil prices are burdening American working-class and middle-class commuting. As consumers begin to use alternative energy sources to power cars, oil prices should be kept at a low level.

U.S. Secretary of Energy Granholm stated on the NBC program that the increase in gasoline prices in the United States was caused by OPEC’s monopoly. She said: “Natural gas prices are of course based on the global oil market. The oil market is controlled by OPEC+, so they raise oil prices. Price has more say."

OPEC+ does not buy Biden's account, member states have resisted increasing production faster

More and more member states are rejecting US President Joe Biden’s call for the organization to speed up production and help reduce gasoline prices.

Kuwait said on Monday that the oil market is very balanced and the organization should stick to its plan to gradually increase production. A few days before, other key members also issued similar statements, including Iraq, Algeria, Angola and Nigeria.

OPEC+, led by Saudi Arabia and Russia, will hold a meeting on Thursday. Pressure from oil-consuming countries is increasing because oil prices have exceeded US$85 per barrel. U.S. gasoline prices are at a seven-year high, reaching $3.70 per gallon.

The United States, India, Japan and other countries are launching a campaign to force OPEC+ to lift the supply restrictions caused by the epidemic last year more quickly. Biden said on Sunday that if Russia, Saudi Arabia and other major oil-producing countries do not increase production, people will have no gasoline to commute to get off work.

Although Biden declined to say how he will react if OPEC+ does not change its position, analysts speculate that the United States may sell some strategic oil reserves.

Angolan Oil Minister Diamantino Pedro Azevedo said on Sunday that OPEC+’s plan to increase production by 400,000 barrels per day “is working well and there is no need to deviate”.

Many member states, including Saudi Arabia, have stated that they should no longer speed up crude oil extraction, because the epidemic is still restricting demand. After the sharp reduction in production last year, some countries have found it difficult to achieve higher production quotas, and said that faster recovery of production will make their task more difficult.

Saudi Energy Minister Abdulaziz bin Salman said on October 23 that we have not gotten out of the predicament yet. We don't take things for granted and the epidemic is still there.

Oil prices remain strong, Bank of America believes that Brent oil prices will reach $120 within a few months

One of the key factors that keep oil prices strong at the moment is that OPEC+ is unwilling to compromise on calls for increased production in the market. More and more OPEC members have recently rejected US President Joe Biden’s request for the organization to speed up production and help reduce gasoline prices. call.

With the current international oil prices bucking the downward trend in the context of the sharp fall in natural gas and coal prices, the differentiation in the energy market may also indicate that the market is gradually stripping away from irrational price increases, but the real systemic supply and demand problems There is still no clear way out.

At present, many investment banking institutions have expected that oil prices may rise to triple digits next. Bank of America issued a report this week, stating that it is expected that by the end of June 2022, the price of Brent crude oil futures will reach $120 per barrel. The catalyst for Bank of America’s upward adjustment of oil prices is that the energy crisis has not yet seen signs of relief. With the tightening of the market, the prices of crude oil, coal, natural gas and liquefied natural gas have remained high.

Bank of America predicts that by the end of June 2022, Brent crude oil prices will reach $120 per barrel. Bank of America analysts such as Francisco Blanch said that an energy crisis led to soaring global natural gas and coal prices, pushing the benchmark London and New York crude oil futures to rebound.

Several oil traders said that as demand exceeds supply and the slowdown in investment in new resources caused by climate issues may deplete reserves, oil prices are rapidly approaching $100 per barrel.

Analysts wrote that a surge in gasoline demand, a rebound in middle distillates (such as diesel and jet fuel), coupled with restrictions on refining capacity, may accelerate the rise in oil prices until 2022.