Crude oil trading reminder: falling inventories boosted oil prices to recover, wary of blind optimism about the new crown epidemic

At the beginning of the Asian market on Thursday (December 16), U.
S.
oil extended its rally and is now at $72.
64 / barrel; Oil prices rose more than 1.
65% on Wednesday as U.
S.
inventory data showed strong consumer demand; However, due to the accelerated transmission of variant strains and the expectation of interest rate hikes by the Federal Reserve, there are downside risks
to oil prices.

During the day, we will focus on the preliminary Markit manufacturing PMI for December and the monthly rate of industrial output in the United States for November
.

Factors affecting oil prices

U.
S.
crude inventories fell 4.
6 million barrels last week amid an unexpected decline in fuel inventories as potential consumer demand rose to record highs
, the U.
S.
Energy Information Administration said on Wednesday.

U.
S.
crude inventories fell by 4.
6 million barrels to 428.
3 million barrels in the week ended Dec.
10, more than
double the 2.
1 million barrel decline estimated in a Reuters poll.

Supply of refinery products, a measure of demand, rose to 23.
2 million b/d in the latest week on higher supplies of gasoline, diesel and other refined products
.
The less volatile four-week average demand is now at 21.
3 million b/d, above pre-pandemic levels
.

Matt Smith, Chief Oil Analyst for the Americas at Kpler, said: "Potential demand for refined products is exceptionally strong as retailers prepare for a busy holiday season
.
”

The decline in crude inventories was partly due to a sharp increase in exports, which rose to 3.
6 million b/d, reducing net U.
S.
crude imports by 1.
4 million b/d to 2.
8 million b/d
.

Part of the reason for the sharp drop in imports may be year-end tax considerations, as many states and localities assess taxes
based on crude oil inventories held at the end of the year.
As a result, Smith said, companies seek to increase exports and push down imports to reduce inventories
.

While the United States has made good on its statement to release its National Strategic Reserve Stocks, which have fallen to their lowest level since late 2002, overall commercial crude oil inventories are still declining
.

U.
S.
gasoline inventories fell by 719,000 barrels this week to 218.
6 million barrels, compared with an expected increase of 1.
6 million barrels
.
Distillate inventories, including diesel and heating oil, fell by 2.
9 million barrels versus an expected increase of 688,000 barrels
, EIA data showed.
Refinery output fell by 115,000 barrels
per day last week, the EIA said.
The refinery's capacity utilization rate was unchanged at 89.
8%.

Giovanni Staunovo, commodities analyst at UBS, said: "The EIA data is very strong on all fronts, with record potential oil demand and a large
decline in crude and refined product inventories.
"

[Benchmark stock indexes all higher, the market expects the Fed to raise interest rates without hindering economic growth]

U.
S.
stocks rose on the belief that the Federal Reserve would be able to curb soaring prices without impeding economic growth
.
After the Fed's policy statement, the S&P 500 extended gains, and the Nasdaq 100 jumped about 2.
5%

U.
S.
Treasury yields rose as money markets turned to forecasts that the Federal Reserve would raise interest rates three
times next year.
The new dot plot also shows that there will be three rate hikes in 2023 and two
in 2024.

Seema Shah, chief strategist at Principal Global Investors, said, "One of the big questions facing the market right now is whether the U.
S.
economy can absorb this rate hike rate without stomach pain," and six rate hikes in two years after a 20-month hiatus may seem overwhelming, but compared to previous cycles (17 consecutive Fed hikes from 2004 to 2006), we temporarily believe the U.
S.
economy can handle it
。 Not only that, but the inflation situation also requires the Fed to raise interest rates
.
”

Fed Chairman Jerome Powell told reporters at a press conference that "changes in the economic situation and outlook support monetary policy adjustment, and the economy has been developing
rapidly towards full employment.
" ”

[New York Fed manufacturing index growth exceeded expectations]

New York State's manufacturing index grew more than expected in December, with strong order growth leading to an increase
in the backlog.
Data released on Wednesday showed that the New York Federal Reserve Bank manufacturing survey index rose 1 point to 31.
9
.
A reading above zero indicates that economic activity is expanding
.
The median estimate of economists from the Bloomberg survey is 25
.
The report showed inflation falling slightly, while other indicators remained elevated
.
An indicator of the price of raw materials paid fell to 80.
2
from the second-highest level on record in November, 83.
The measure of raw material prices received fell 6.
2 points from a record high to 44.
6
.

Looking ahead, a measure of how companies receive price expectations over the next six months jumped to record levels, suggesting that inflationary pressures are likely to persist
in early 2022.
A measure of outstanding orders jumped 6.
3 points to a three-month high of 19, and a measure of total orders fell slightly from November
.
The New York Fed's employment measure eased to 21.
4
after a record high of 26 a month ago.

Negative factors affecting oil prices

[Omicron accelerates spread, new crown cases in the UK hit record high]

The United Kingdom reported 78,610 new coronavirus cases on Wednesday, the highest since the pandemic began, highlighting the high transmissibility
of the Omicron variant.
The previous record high was 68,053 cases on January 8, days after
the Alpha variant caused a wave of outbreaks and the UK went into lockdown.

Research advisers have warned that what Prime Minister Boris Johnson has called a "tsunami-like" wave of Omicron infections will lead to an increase
in hospitalisations.
It's unclear how effective a vaccine is against this variant, but early research suggests that two doses plus a booster dose can provide 75 percent protection
against the Omicron strain.

While positive test results in the UK are accelerating, the death toll is well below levels
seen in the early days of the pandemic.
Scientists hope that a rapid push for booster shots will help keep the number of severe cases low
, even as case numbers rise.

[The head of the European Center for Disease Control and Prevention said that the new crown epidemic will not end in 2-3 years]

Andrea Ammon, director of the European Centre for Disease Control and Prevention, told Handelsblatt that expecting the coronavirus pandemic to end "at least in the next two to three years" was "wishful thinking"
.
New vaccines are currently expected to be released periodically, requiring rapid booster shots, which can be given
up to 3 months after the second dose.

The accelerated spread of the epidemic has led oil analysts to expect the Omicron variant to dampen demand in the coming months, and has also increased the confidence that crude oil inventories will accelerate every year; Stephen Brennock, an analyst at PVM Oil Associates Ltd.
, said, "Supply has finally caught up with demand, and this trend is expected to strengthen in 2022," "In short, the oil market will face a serious oversupply situation
next year.
" ”

[Omicron strain found in 36 states in the United States]

According to the latest data from the US Centers for Disease Control and Prevention, the Omicron strain has now spread to 36 states, and this new strain currently accounts for about 13%
of all new crown cases in New York and New Jersey.

Comprehensive "New York Post" and many other US media reported on the 15th, the director of the US Centers for Disease Control and Prevention Walensky said on the same day that it is estimated that the Omicron strain accounts for about 3%
of the new crown infection cases that are sequenced nationwide.
New York and New Jersey have the highest infection rates, with the Omicron strain expected to account for 13%
of all confirmed cases.
However, experts say the numbers are likely to be underestimated due to the rapid transmission of the Omicron
strain.

Walensky also confirmed that the Omicron strain has spread in 36 U.
S.
states, accounting for about 3 percent
of all cases in the United States.
"We expect the proportion of Omicron cases in the United States to continue to grow
in the coming weeks.
"

[U.
S.
retail sales growth slower-than-expected in November

U.
S.
retail sales rose less than expected in November, suggesting consumers are curbing shopping
against a backdrop of inflation reaching its highest in decades.
Commerce Department data on Wednesday showed headline retail sales rose 0.
3 percent in November, the lowest increase in four months, and the October figure was revised upward to an increase of 1.
8 percent
.
Excluding gasoline and automobiles, sales rose 0.
2%
in November.
These figures are not inflation-adjusted
.

The weaker-than-expected report may also reflect the impact of holiday sales moving forward, as many Americans who know supply chain difficulties are shopping for their holidays earlier than usual
.
October saw the highest
increase in retail sales in seven months.

The U.
S.
consumer price index rose at its fastest
pace in nearly 40 years.
The risk of accelerating inflation could make consumers more reluctant to shop in the coming months, especially as remaining financial support, such as
a moratorium on federal student loan payments, ends early next year.
November's inflation-adjusted consumer spending data, including for services, will be released
next week.

Retail sales fell last month in five of the 13 retail categories, with electronics and home appliances seeing the largest
declines.
Sales by non-store retailers, including e-commerce, were little changed
in November.

Rising prices may have partly driven sales growth in categories such as gas stations and grocery stores
.
Sales of restaurants and bars, the only service category in the data, rose 1 percent
.
So-called control group sales, which are used to calculate gross domestic product and exclude food service, car dealers, building materials stores and gas station sales, fell 0.
1%
month-on-month in November.

Overall, although oil prices were boosted by lower inventories in the short term; However, it is necessary to pay attention to the impact of the Fed's interest rate hike expectations on the downside risk of oil prices, as well as the long-term impact of the accelerated transmission of the Omicron strain on oil prices, especially the risk
of the accelerated outbreak of variant infection in some countries and regions, which will trigger a short-term decline in oil prices.

At 8:13 Beijing time, U.
S.
crude oil is now at $71.
64 per barrel
.