During the Asian session on Thursday (September 2), U.S. crude oil hovered around 68.23, and oil prices stabilized on Wednesday after OPEC+, which was formed by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, agreed to adhere to the existing policy of gradually increasing oil production; the United States Crude oil inventory data sent a bullish signal.
During the day, focus on the US trade account in July, the number of layoffs by American challenger companies in August, the number of people claiming unemployment benefits in the week as of August 28, and the final value of the monthly rate of durable goods orders in the United States in July; Friday at 1:00 by the Federal Reserve. Stick delivered a speech, and at 3:00 Fed Daley delivered a speech.
Negative factors affecting oil prices
[S&P 500 Index upside blocked]
The U.S. stock market gave up almost all the gains of the day. In the S&P 500, energy and financial stocks fell. Although large-cap stocks rose, traders turned to defensive stocks due to economic data showing a slowdown in the labor market recovery. ADP data shows that the number of new employees in US companies is less than expected. In August, the manufacturing industry expanded faster than expected, and manufacturers still faced supply chain bottlenecks and labor market constraints.
Linda Dussel, senior equity strategist at Federated Hermes, believes that there is no time to be pessimistic about the stock market. Although more and more Wall Street people predict that the market will soon pull back, she said on Bloomberg TV on Wednesday that the “incredibly” strong earnings numbers and fiscal stimulus policies mean that the stock market can keep rising for a longer period of time. , While Tobias Levkovich, Citigroup’s chief U.S. equity strategist, insists on being short, predicting that the S&P 500 will reach 4000 points by the end of the year and 4350 points in June 2022.
[OPEC+ decided to maintain the timetable for increasing production by 400,000 barrels per day]
OPEC+ agreed on Wednesday to stick to its existing policy of gradually increasing oil production. In July, the alliance agreed to gradually cut record production cuts, increasing oil production by 400,000 barrels per day each month.
OPEC+ raised its demand forecast for 2022 and faced pressure from the United States to increase production more quickly. OPEC+ said in a statement, “Although the impact of the new crown pandemic continues to bring some uncertainty, market fundamentals have strengthened. As the recovery accelerates, the oil inventories of OECD countries continue to fall.”
Russian Deputy Prime Minister Alexander Novak stated that OPEC+ has achieved a goal of removing surplus oil from the global market, and maintaining market balance is essential.
The video conference lasted less than an hour, and was one of the shortest meetings in memory in recent memory, in sharp contrast to the difficult negotiations in July.
Although the current situation may be beneficial to OPEC, there are still uncertainties in the near term. Even if demand recovers, the emergence of mutant strains of the new crown will affect oil demand. In addition, it is still unknown whether Iran and the United States can reach an agreement on lifting sanctions on Iran’s oil exports. At present, it is unlikely that the sanctions will be lifted.
Given that crude oil prices have basically recovered the ground lost in mid-August, and the supply outlook this year is relatively tight, OPEC+ has almost no reason to change the timetable for gradual increase in production each month. At present, about 45% of the idle capacity has been restored. In July, OPEC+ plans to gradually restore the remaining capacity until September 2022.
Data submitted to energy ministers of various countries show that Saudi Arabia and its allies face new challenges in 2022. The market expects there will be an oversupply next year, reaching an average of 1.6 million barrels per day. However, these forecasts are based on the assumption that OPEC+ will restore nearly 6 million barrels of production capacity per day, which is unlikely to happen because many countries cannot fully meet their production targets.
John Kilduff, a partner at Again Capital LLC, said that OPEC+’s decision in “record time” shows that they are united, rather than disagreements in recent rounds of meetings that the market is worried about. With the gradual recovery of oil and gas production along the Gulf Coast, it is expected that U.S. crude oil prices will remain under pressure. However, analysts said it may take several weeks to restart the Louisiana refinery that was shut down due to Hurricane Ida.
[New employees in US companies are significantly less than expected]
The number of new jobs added by US companies in August was less than expected, reflecting stubborn recruitment challenges and a slowing recovery in the labor market.
Data released by the ADP Research Institute on Wednesday showed that the number of employees in US companies increased by 374,000 last month, which was lower than the estimates of all economists surveyed by Bloomberg. The revised data in July was an increase of 326,000.
The weaker-than-expected growth in recruitment numbers indicates that companies are still struggling to attract job seekers to fill record vacancies. At the same time, if consumer spending in service industries such as dining out drops significantly, the rampant delta mutant strain may bring more resistance to recruitment. The number of service providers employed increased by 329,000 in August. The leisure and hospitality industry increased by 201,000 in the same month. The number of employment in commodity producers rose by 45,000, and the construction industry increased by 30,000.
Moody’s chief economist Mark Zandi said in a statement that “the new crown delta strain seems to inhibit the recovery of the job market.” “Employment growth remains strong, but it is far from the pace of recent months.”
According to ADP, cumulative employment growth in July and August was the lowest since the beginning of this year. Economists surveyed by Bloomberg predict that the number of employed people will increase by 652,000 in August. The government will then release its own statistics, and the market expects the unemployment rate to drop to 5.2% as the participation rate increases. Companies of all sizes recorded employment growth in August. Companies with 500 or more employees increased by 138,000, and small businesses increased by 86,000. ADP employment data covers companies with nearly 26 million employees in the United States.
Bullish factors affecting oil prices
[U.S. demand for refined oil hit a record high last week]
The U.S. Energy Information Administration (EIA) announced on Wednesday that despite the rise in the number of new cases in the United States, U.S. crude oil inventories fell sharply last week, and the scale of refined oil supply from refineries hit a record high.
As of the week of August 27, crude oil inventories plummeted 7.169 million barrels to 425.4 million barrels. Analysts in a Reuters survey estimated a decrease of 3.1 million barrels. The refinery’s refined oil supply as a measure of demand rose to 22.8 million barrels per day, a record high for the next week, indicating strong consumption of diesel, gasoline and other fuels by consumers and exporters. This is a measure of demand. The four-week average rose to 21.4 million barrels per day, the highest since September 2019.
CHS Hedging analyst Tony Headrick said: “The total supply of refined oil has increased considerably. This surprised me. We see that despite some concerns about the Delta variant virus, demand remains strong.”
The next week’s data may be affected by the decline in offshore platform production caused by Hurricane Ida, which also caused many US refineries along the Gulf Coast to disrupt production.
U.S. crude oil production rose to 11.5 million barrels per day last week, the highest since May 2020. Weekly production data fluctuates greatly, and analysts usually rely more on EIA’s monthly data to measure production.
According to EIA, last week, the refinery’s refining capacity decreased by 134,000 barrels per day, and the capacity utilization rate fell by 1.1 percentage points, due to the gradual end of the summer driving season and the approaching maintenance season. Due to the shortage of workers due to the epidemic, many refineries postponed maintenance last year.
Gasoline inventories unexpectedly increased by 1.29 million barrels last week to 227.2 million barrels, which is estimated to decrease by 1.6 million barrels. Distillate stocks, including diesel and heating oil, fell by 1.7 million barrels, which is expected to decrease by 650,000 barrels. Last week, US crude oil imports fell by 45,000 barrels per day.
[ThenumberofhospitalizedpatientswithCOVID-19intheUnitedStateshasdroppedforthefirsttimesinceJune]
The number of hospitalized patients with the new crown in the United States has declined for the first time since the end of June, indicating that the recent wave of counter-attacks may have peaked at least for now. According to data from the US Department of Health and Human Services, the seven-day average number of new coronavirus hospitalizations in a single day fell by 2.4% from the previous week to 12,280, the first drop since June 27. This is mainly driven by the decline in the number of hospitalizations in recent hot spots such as Florida, Texas, and the Deep South.
The situation may not continue to improve. The number of new crown infections and hospitalized patients in many rural areas, including West Virginia and the Great Plains, is rising sharply, although urban areas have stabilized.
On the whole, OPEC+ is in line with the expected production policy statement and did not bring unexpected fluctuations in oil prices. Oil prices are more affected by the reduction in inventories and the increase in demand for refined oil, making oil prices basically stable at the close on Wednesday; short-term oil prices may increase. The recovery time of refineries mostly affected by Hurricane Ida and the impact of Friday’s US non-agricultural data.
At 08:14 Beijing time, US crude oil is currently reported at US$68.23 per barrel.