Declining Inventories Have Not Driven Up Oil Prices. What is the Market Outlook?
On Tuesday (July 27), the U.S. dollar index fell. Investors waited for the results of the Fed’s two-day policy meeting this week to find signals about when the Fed will begin to reduce the size of asset purchases; the New Zealand dollar led the decline in commodity currencies. Gold prices are basically flat, investors are waiting for the Fed meeting, and officials are expected to discuss future reductions in monetary stimulus. Crude oil futures prices closed down, and investors worried that global demand might be affected by the surge in the number of new cases, despite tighter supplies and increased vaccination rates.
US benchmark crude oil futures may have recorded a second monthly decline since October, as the delta variant interrupted the demand rebound. Although global inventories are expected to tighten until the end of the year, new travel restrictions have curbed oil consumption in some countries. John Kilduff, a partner at Again Capital LLC, said that the current situation is more of a blow to market sentiment. The oil market is more sensitive to the development of the epidemic, especially when the epidemic worsens.
During the Asian session on Wednesday (July 28), US crude oil hovered around 72. API data released earlier showed that as of the week of July 23, US gasoline inventories fell by 6.226 million barrels, refined oil fell by 1.882 million barrels, and crude oil Inventories fell by 4.728 million barrels; oil prices fell 0.3% on Tuesday as the surge in global new crown cases triggered concerns about short-term demand.
API data released in the morning showed that as of the week of July 23, US gasoline inventories fell by 6.226 million barrels, refined oil fell by 1.882 million barrels, and crude oil inventories fell by 4.728 million barrels. John Kilduff, a partner at Again Capital LLC, said that although global inventories are expected to tighten until the end of the year, new travel restrictions have curbed oil consumption in some countries. Colin Cieszynski, chief market strategist at SIA Wealth Management, said that after the Organization of Petroleum Exporting Countries and its allies (OPEC+) reached an agreement to gradually increase production earlier this month, the focus of the crude oil market has returned to the demand side. Like the stock market, oil demand has been affected by concerns about the spread of mutant delta strains. Cieszynski believes that current oil prices will continue to consolidate within the range of 65 to 77 dollars earlier this year.
In fact, a series of events such as the talks of the world’s first and second largest economies, the Delta variant virus, and the plummeting of China’s education stocks since this week have all affected market sentiment. However, from the current market response and oil demand-related data, the basic point that WTI crude oil is in a rapid recovery phase in demand has not been affected. It was announced in the early morning of Wednesday (July 28) that API crude oil inventories in the United States fell by 4.728 million barrels for the week to July 23, which exceeded market expectations and fell by 3.743 million barrels. The decline in oil and gasoline inventories was greater than expected, highlighting the continued demand recovery. .
Looking ahead, the WTI crude oil divergence may still be on the Iran nuclear agreement and the Federal Reserve’s interest rate resolution announced in the early morning of Thursday (July 29). According to news, the latest request made by Iran in the negotiations on the nuclear agreement last Sunday (July 25) is that “the United States must obtain the approval of the United Nations before it withdraws from the Iran nuclear agreement.” However, this request seems to be in line with the US Constitution. Contrary to this, and with the delay in reaching the Iranian nuclear agreement, Iran’s new hardliner president will take office in mid-August. This makes the uncertainty of the Iranian nuclear agreement continue to increase, which is expected to provide room for imagination for further increases in oil prices.