During the Asian session on Wednesday (September 15), U.S. crude oil hovered around 70.88. API data in the morning showed that U.S. crude oil inventories decreased by 5.437 million barrels; oil prices closed basically flat on Tuesday, as tropical storm “Nicholas” brought Texas Heavy rains and blackouts have caused less damage to the US energy infrastructure than Hurricane Ida earlier this month.
In the day, we will focus on China’s August retail sales of consumer goods, the monthly rate of the US import price index in August, and the changes in US EIA crude oil inventories for the week as of September 10.
Bullish factors affecting oil prices
[U.S. crude oil inventories plummeted by 5.4 million barrels last week]
Early in the morning, the American Petroleum Institute (API) data showed that US crude oil, gasoline and distillate stocks fell last week after Hurricane Ida caused many refineries and offshore oil production facilities to shut down.
Data show that as of the week of September 10, crude oil inventories decreased by 5.4 million barrels, gasoline inventories decreased by 2.8 million barrels, and distillate inventories decreased by 2.9 million barrels.
[Tropical storm Nicholas caused power outages in hundreds of thousands of households in the U.S. Gulf of Mexico]
Hurricane Nicholas caused widespread power outages Texas’s oil pipeline to the east coast was shut down. After Hurricane Nicholas caused power outages to nearly 500,000 homes and businesses, North America’s largest gasoline pipeline stopped the transportation of gasoline from Texas to the east coast.
The power outage after the hurricane made landfall early on Tuesday morning disrupted the operation of a natural gas export terminal 70 miles south of Houston. The piers along the Texas coast are closed, and the US Coast Guard is assessing the condition of the sea lanes.
After Colonial Pipeline Co. closed gasoline, diesel and aviation fuel pipelines, gasoline refining profit margins climbed by more than 3%. According to the Colonial Pipeline statement, as a “temporary and preventive measure”, the fuel pipeline has been closed, and their daily delivery of fuel is more than the fuel consumption of Germany.
Although Nicholas did not affect offshore oil production in the U.S. Gulf of Mexico, the power outage caused by the storm briefly cut off the largest gasoline pipeline in the United States, which transports fuel from Houston to the northeastern United States.
John Kilduff, a partner at Again Capital LLC in New York, said, “The Gulf of Mexico situation will not resolve itself soon. Affected by strong winds, Royal Dutch Shell shut down an offshore oil platform. Due to bad weather conditions, some energy hubs Ship traffic is suspended.”
[The world still needs to wait for additional oil supplies]
The International Energy Agency (IEA) stated that the output loss caused by Hurricane Ida offset the impact of OPEC+ production increase, and the world needs to wait until October to get additional oil supplies.
The IEA said in its monthly report that as the Organization of Petroleum Exporting Countries (OPEC) and its allies continue to restore idle production capacity, the world should have seen a “solid increase” in production, but due to unexpected interruptions, global supply decreased by 540,000 in August. Barrels/day, this month will be flat.
The IEA stated that “unplanned production interruptions have suspended the upward trend in world oil supply since March, but will resume in October.”
IEA said that from July to September, global fuel consumption will decrease by an average of 310,000 barrels per day per month. However, there are signs that the momentum of the epidemic’s counterattack is weakening. The agency expects that next month’s daily demand will rebound sharply by 1.6 million barrels and maintain growth before the end of the year. The changes in the supply and demand situation mean that the trend of shrinking oil market inventories this year will not abate. According to preliminary estimates by the IEA, fuel inventories in advanced economies fell by 30 million barrels last month, 186 million barrels lower than the five-year average. The agency stated that there should be another “significant contraction” this month. According to the report, “the supply will not be high enough to replenish oil storage tons until the beginning of 2022,” “At the same time, the strategic oil inventories of the United States and China may help fill the gap.”
Negative factors affecting oil prices
[Iraq cuts oil prices to the United States sharply]
Iraq has drastically lowered the price of Basra light crude oil for the United States, which is very different from Saudi Arabia’s choice of handling domestic crude oil a few days ago.
According to a price list of the Iraqi National Petroleum Sales Corporation, in October, Iraqi Basra light crude oil will be sold to buyers in the Americas at a price of $1.15/barrel lower than the regional benchmark.
This move has aroused market attention because, like many Middle Eastern countries, Iraq rarely has too much disagreement with Saudi Arabia in terms of pricing. But earlier this month, Saudi Arabia set the price of its flagship Arabian Light crude oil in October at a premium of US$1.35 per barrel compared to US sour crude, the same as in September. In addition to Kirkuk crude oil sold from Mediterranean ports, Iraq has also reduced prices to buyers everywhere.
[S&P 500 Index closed down, economic slowdown and other uncertainties overwhelm the impact of the latest CPI data]
The S&P 500 index closed down on Tuesday. The index closed down 0.6%, marking the sixth decline in seven days. 11 major industry sectors fell across the board, with energy and financial sectors leading the decline. Analysts said that although the US Consumer Price Index (CPI) rose less than expected, it may not change the Fed’s reduction schedule.
The U.S. CPI rose less than expected in August, indicating that the upward pressure on inflation has begun to weaken. The U.S. stock market initially responded positively to the data, but quickly gave up the increase. City Index senior financial market analyst Fiona Cincotta said this was because of non-compliance. There is more and more certainty, including the possible increase in corporate tax, the slowdown in economic growth and the increase in new cases of new crowns, etc.
“Furthermore, inflation has not slowed down enough for the Fed to change direction. Downsizing is still imminent, although no start date has been decided yet.”
[U.S. core inflation in August fell to the lowest in six months]
The U.S. August’s core consumer price index (CPI) growth rate was the lowest in six months, due to the sharp drop in the price of used cars, suggesting that inflation may have peaked, but in the case of continued supply constraints, inflation may remain for a period of time In the high position.
The general slowdown in price pressures announced by the US Department of Labor on Tuesday is consistent with Federal Reserve Chairman Powell’s long-term view that high inflation is only temporary. However, analysts warned that it is too early to celebrate and expect the Fed to announce its plan in November to start reducing its monthly large-scale bond purchase program.
James McCann, deputy chief analyst at berdeen Standard Investments, said, “Inflation remains disturbingly strong, even if it doesn’t erupt as it did earlier this year,” “If we continue to see further declines in inflation in the next six months, that should ease the Fed. The pressure to raise interest rates quickly after reducing debt purchases.” Airfare prices plummeted by 9.1% in August, which may be due to the further aggravation of the epidemic caused by the Delta variant virus, which weakened the demand for air travel.
But supply chain bottlenecks still exist, and the labor market is tightening, pushing up wage levels. As of the end of July, the number of job vacancies reached a record 10.9 million, forcing companies to raise wages in order to compete for workers.
The overall CPI rose 0.3% in August, the smallest increase since January. The increase in July was 0.5%. In the 12 months ending in August, the CPI rose by 5.3% after rising 5.4% year-on-year in July.
Chris Low, chief economist at FHN Financial in New York, said, “Even if the quarter-on-quarter increase in CPI slows, the momentum of substantial year-on-year growth will continue until 2022.”
Generally speaking, the reduction of API inventory is good for oil prices. Although the impact of tropical storm “Nicholas” on crude oil production is lower than expected, and the increase in oil prices is limited, oil prices may fluctuate upwards in the short term. The situation in the Gulf of Mexico may not be resolved soon. Pay attention to the EIA data in the day, and it is currently expected that crude oil inventories will be reduced by 3.574 million barrels. If the data is good, it will boost oil prices.
At 8:12 Beijing time, U.S. crude oil is now quoted at US$70.88/barrel.