EIA crude inventories rose more than expected but not as much as API, and U.S. oil rose $1 in the short term

On Wednesday (October 26) in the New York session, at 22:30 Beijing time, data released by the US EIA showed that the increase in commercial crude oil inventories in the United States in addition to strategic reserves in the week ending October 21 exceeded expectations, but the increase was not as much as API data, refined oil inventories slightly exceeded expectations, and gasoline inventories were lower than expected
.
U.
S.
crude oil prices rose by $
1 short-term after the EIA data.

EIA crude oil inventories rose more than expected

Specific data show that the actual increase in EIA crude oil inventories in the United States for the week ended October 21 was 2.
588 million barrels, an expected increase of 102.
9 barrels, and a decrease of 1.
725 million barrels
in the previous week.

In addition, the actual decrease in EIA gasoline inventories in the United States for the week ended October 21 was 1.
478 million barrels versus an expected decrease of 805,000 barrels; the previous value decreased by 114,000 barrels; the actual increase in EIA refined oil inventories in the United States for the week ended October 21 was 170,000 barrels vs.
an expected decrease of 1.
138 million barrels; and the previous value increased by 124,000 barrels
.

The EIA report showed that U.
S.
domestic crude oil production remained unchanged
at 12 million b/d in the week of Oct.
21.
U.
S.
crude exports rose 991,000 b/d to 5.
129 million b/d
in the week of Oct.
21.
U.
S.
Strategic Petroleum Reserve (SPR) inventories fell by 3.
417 million barrels, or 0.
84%,
to 401.
7 million barrels in the week of Oct.
21.
The four-week average supply of U.
S.
crude products was 20.
363 million b/d, down 1.
94%
from a year earlier.

The EIA report showed that the United States imported 6.
180 million b/d of commercial crude oil excluding strategic reserves in the week of Oct.
21, an increase of 272,000 b/d
from the previous week.
Commercial crude inventories, excluding strategic reserves, rose 2.
588 million barrels, or 0.
59 percent
, to 440 million barrels.

According to the EIA report, U.
S.
commercial crude oil inventories excluding strategic reserves in the week ended October 21 were the highest since the
week of July 2, 2021.
U.
S.
EIA Strategic Petroleum Reserve inventories for the week ended Oct.
21 were the lowest
since the week ended May 25, 1984.
U.
S.
Gulf Coast crude inventories rose last week to their highest level
since June 2021.
U.
S.
crude oil exports hit a record high
for the week ended Oct.
21.

US crude oil price 5-minute chart displays

Fears of a global recession weigh heavily on oil prices

Weak economic data from China and the United States has triggered fears of
a recession and weakened crude oil demand.
China on Tuesday released anemic economic data that had been delayed, raising concerns about crude demand and putting downward pressure
on oil prices.
China's third-quarter gross domestic product grew 3.
9% year-on-year, while retail sales growth slowed to 2.
5% in September as continued virus controls weighed on market sentiment
.

ANZ analysts explained that China has shown no signs
of departing from the current zero-crown strategic policy that is putting pressure on economic activity.
The recent recovery in China's oil imports faltered
in September.
Independent refineries have failed to take advantage of increased quotas
amid ongoing lockdowns weighing on demand.
This is exacerbated by
lower refining margins and product export restrictions.

At the same time, economic data released by the United States showed that consumer confidence is still falling, while house prices are also falling, suggesting that tighter monetary policy may begin to affect consumer spending, increase the risk of a recession in the United States, and dampen demand
.
Brett Ryan, senior U.
S.
economist at Deutsche Bank, said that as the Fed continues to aggressively tighten to control inflation, a small recession is expected to begin in the third quarter of next year, with real growth sliding into negative numbers and unemployment rising
sharply.
Meanwhile, the National Association for Business Economics' October Business Conditions Survey found that nearly two-thirds of economists surveyed believe the U.
S
.
is either in recession or could fall into one within a year.

Analysts at financial institution Sevens Report Research said that with recession fears rising but global supply dynamics remain tight, the new trading range for oil prices will be between
support above $70 and resistance below $90.

OPEC production cuts have always supported oil prices

Saudi Arabia's energy minister, Prince Salman, said at a Future Initiative Investment (FII) conference in Riyadh on Tuesday that Saudi Arabia is the safest and most reliable supplier of oil and believes the current crisis could be the most serious energy crisis
.
It's not a question of a recession, it's just how severe
it might be.
Some countries are depleting their emergency stocks and using them as a mechanism to manipulate markets with the aim of alleviating supply shortages
.
Using the emergency reserve could be painful
in the coming months.

IEA Director Birol said: "The tightening of the global LNG market and supply cuts in major oil producers have put the world in a
truly global energy crisis.
Phil Flynn, an analyst at Price Futures Group, said the statements from Riyadh and the IEA reminded us that the energy crisis is far from over and that there are still concerns about the lack of supply in the
market.

TD Securities analysts pointed out that crude oil prices have been range-bound since OPEC+ oil producers announced the largest production cut since the epidemic, and they believe that the time spread has rebounded sharply, indicating that the market will tighten
in the future.
Our measurement of energy supply risk remains at its highest level this year, underscoring that supply risk premiums continue to provide strong support
for crude oil prices in the unlikely face of an 'impending Iran deal'.
" In the short term, Brent is expected to follow suit, with the previous trend of selling plans being shaken
by range-bound exchanges.

The Fed's slowing pace of interest rate hikes supports oil prices

Market speculation that the Fed's monetary policy tightening cycle may be nearing its end
.
Weak U.
S.
data hinting that aggressive policies by the Federal Reserve are taking effect, underpinning the central bank's earlier policy shift and pushing risk appetite back and sharply lower dollar indexes, also boosted the attractiveness of crude oil, as a weaker dollar is cheaper
for buyers of crude oil holding non-U.
S.
currencies.
Bill Merz, head of capital markets research at Bank of America Wealth Management, said, "There is more and more
talk about the dawn at the end of the tunnel for the Fed to raise interest rates.
For some time, though, it won't be known whether inflation, which is at multi-decade highs, is 'decisively moving toward the Fed's target'
.
We have seen the dollar rally ease and long-term Treasury yields fall
.
These factors combine to provide a little room
for crude oil to rebound.
”

Wells Fargo economists expect the dollar to move further higher and expect the dollar to peak cyclically in the first quarter of 2023
.
The relative elasticity of the U.
S.
economy and the Fed's continued rate hikes, combined with instability in global markets, should send the dollar's trade-weighted exchange rate up a further 4% or
so over the next three to six months.
Given that the US policy rate is likely to remain high even in the event of a US recession, we expect the dollar to weaken
only modestly through 2023.

The EU's restrictions on Russian oil prices have raised supply shortage concerns

The escalation of the Russia-Ukraine conflict continued to provide support for oil prices as tensions in the region raised concerns about
supply disruptions.
Russia's "Izvestia" reported on Tuesday that Russia asked the United Nations Security Council to discuss Ukraine's readiness to use "dirty bombs" to provoke on the same day
.
Russia's Permanent Representative to the United Nations Nebenja sent a letter to UN Secretary-General Guterres on the 24th, calling for every effort to be made to prevent "this heinous crime", which may cause serious consequences and a large number of civilian casualties
.
Moscow will view the Kiev regime's use of "dirty bombs" as an act of nuclear terrorism, saying the provocation may have been carried out
by Ukraine with the support of Western countries.