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Market News U.S. inventories surged by 4.3 million barrels last week, and oil prices plunged 3%

U.S. inventories surged by 4.3 million barrels last week, and oil prices plunged 3%

U.S. oil plunged 3% in late trading on October 27 to close at US$82.07 per barrel. The earlier EIA inventory report showed that crude oil inventories increased by 4.268 million barrels as of October 22, far exceeding market expectations of 2 million barrels. This prompted some investors to sell long positions; at the same time, Iran and the European Union agreed to restart negotiations aimed at resuming the 2015 nuclear agreement before the end of next month. This indicates that Iran’s crude oil is more likely to return to the market, which puts oil prices under pressure.

LEO
2021-10-28
9414

On Wednesday (October 27), US oil futures fell 1.99 US dollars, or 2.4%, to settle at US$82.66 per barrel. Bilbao oil fell 1.82 US dollars, or 2.1%, to close at 84.58 US dollars per barrel. Earlier EIA inventory reports showed that as of the week of October 22, crude oil inventories increased by 4.268 million barrels, far exceeding the expected 2 million barrels, prompting some investors to sell long positions. However, refined oil inventories fell last week, and the tanks in the largest oil storage center in the United States were further emptied. Oil prices rose slightly after a brief decline.

Gary Cunningham, head of market research at Tradition Energy, said that it was the profit settlement, not other reasons, that made the market a reasonable correction, but the US crude oil price is still high at $80 per barrel.

According to data from the U.S. Department of Energy, the U.S. crude oil delivery center in Cushing, Oklahoma, has stocks at its lowest level in three years. Forward futures contract prices indicate that supply will continue at this level for several months. Gasoline inventories fell by 2 million barrels to the lowest level in the past four years, and American consumers are struggling to cope with rising gasoline prices. Price Futures Group senior market analyst Phil Flynn said that everyone pays attention to crude oil inventory data because refiners are currently consuming Cushing oil at an incredible rate.

Iranian Deputy Foreign Minister Ali Bagheri Kani said on Twitter that Iran and the European Union have agreed to restart nuclear negotiations by the end of November, and the exact date will be announced next week. However, he did not disclose where the nuclear negotiations will be held and the identity of the attendees. As for whether the United States agrees to the new timetable, it is currently unknown. Affected by this news, the decline in oil prices has expanded, and traders have received the first clear signal in a few months that Iranian oil may soon return to the global market.

The Iranian nuclear talks reached a deadlock in June, shortly after the hardliner Ibrahim Leahy was elected as Iran’s president. Although the European Union has always urged Iran to return to the negotiating table, Leahy’s hawkish diplomatic team expressed the desire to spend more time studying strategies. Amirabdollahian previously said at a press conference in Tehran, "We do not want to start the Vienna negotiations when there is no hope of reaching an agreement, but we accept the form of the Vienna negotiations." At the same time, it also mentioned the tens of billions of dollars in Iranian oil payments frozen in South Korea, Japan and other countries due to US sanctions. He said that he expected Biden to express goodwill and release these frozen funds, but he did not link this issue with the resumption of nuclear negotiations.

ThinkMarkets market analyst Fawad Razaqzada said that if negotiations lead to the end of US sanctions and an increase in Iranian crude oil exports, it may end "the threat of supply shortages, which are part of the reason behind the surge in oil prices."

(U.S. Oil Hour Chart)

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