On Wednesday, international crude oil futures ended their "three consecutive declines" and rose more than 2%. The settlement price of the main contract for WTI crude oil futures in the United States was $82.85 per barrel, an increase of $2.09 or 2.6%. The settlement price of the main Brent crude oil futures contract was $85.08 per barrel, an increase of $1.35 or 1.6%. The main reason for the significant decline in US crude oil inventories, coupled with the weakening of the US dollar, has boosted the valuation of oil prices.
EIA: Crude oil inventories dropped significantly last week
According to foreign news on July 17th, a report released by the US Energy Information Administration (EIA) on Wednesday showed that US crude oil inventories fell more than expected last week. Data shows that as of the week ending July 12th, US crude oil inventories decreased by 4.9 million barrels last week to 440.23 million barrels, with analysts expecting a decrease of 33,000 barrels. After the report was released, WTI crude oil and Brent crude oil rose.
The market generally believes that the decline in crude oil inventories has a positive impact on oil prices, but at the same time, the increase in gasoline and distillate inventories indicates that there are still hidden concerns on the demand side. Data shows that US gasoline inventories increased by 3.3 million barrels to 232.99 million barrels this week, with market estimates suggesting a decline of 1.6 million barrels. The inventory of distillate oil, including diesel and heating oil, increased by 3.5 million barrels to 128.07 million barrels, with a market estimate of a decrease of 800,000 barrels.
Expectations of Fed interest rate cuts strengthen, US dollar weakens
Federal Reserve Governor Christopher Waller hinted at a meeting on Wednesday that as long as there are no major surprises in inflation and employment, the Fed will soon cut interest rates. It stated that the current US economic data is in line with expectations of a soft landing and will seek more data support in the coming months. Currently, the bank is getting closer to the moment of lowering policy interest rates. The expectation of a decrease in interest rates will boost the demand for crude oil.
At the same time, the US dollar weakened synchronously, and the US dollar index hit a four month low. The decline in the US dollar has also led to an increase in the valuation of commodities denominated in US dollars.
Demand uncertainty limits oil price increase
According to Wednesday's EIA inventory data, finished oil inventories increased, reversing market expectations of a previous decline. The performance of US energy demand was not satisfactory. On the one hand, economic activity was affected by the hurricane, and on the other hand, US crude oil exports showed signs of slowing down.
In addition, there are also signs of slowing economic growth in the eurozone and China, especially the decline in China's crude oil imports, which has had a negative impact on the market. Data shows that China's crude oil imports in June decreased to 46.45 million tons month on month; China's June oil table needs to decline by 8.6% year-on-year. The widespread concern in the market about demand has to some extent limited the rise in oil prices.
The crude oil analyst of SunSirs believes that the short-term supply and demand game of crude oil will continue to play a role, and the supply side will be supported by the geopolitical situation and OPEC's production control.
There is uncertainty on the demand side in the future, and in the short term, there will be some pressure on demand due to extreme weather conditions in the United States; In addition, the condition during peak driving season still needs further inspection. In the later stage, it is necessary to pay attention to further developments in the Federal Reserve's interest rate policy, which will provide directional guidance for the future demand for crude oil.
Overall, under the influence of both supply and demand, oil prices will continue to maintain a range oscillation pattern, and the amplitude may increase with the frequent occurrence of market news factors.
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