EIA crude oil inventories and refined product inventories both unexpectedly decreased, and U.S. oil soared $0.8 in the short term

On Wednesday (October 20) during the New York session, at 22:30 Beijing time, data released by the U.
S.
EIA showed that the commercial crude oil inventories in the United States, excluding strategic reserves, were less than expected in the week ended October 15 and unexpectedly recorded a negative value
.
Refined oil stocks and gasoline inventories have also been significantly reduced
.
After the EIA data, the price of U.
S.
crude oil soared by $0.
8 in the short term
.

EIA crude oil inventories and refined product inventories unexpectedly decreased

Specific data show that the EIA crude oil inventory changes in the United States for the week ended October 15 actually decreased by 431,000 barrels, an expected increase of 2 million barrels, and an increase of 6.
088 million barrels
in the previous month.

In addition, EIA gasoline inventories in the United States actually decreased by 5.
368 million barrels in the week ended October 15, compared with an expected decrease of 950,000 barrels and a decrease of 1.
958 million barrels in the previous month, and EIA refined oil inventories in the United States actually decreased by 3.
913 million barrels in the week ended October 15, compared with an expected decrease of 1.
15 million barrels and a decrease of 24,000 barrels
in the previous month.

U.
S.
crude exports rose 546,000 b/d to 3.
06 million b/d
last week, according to the EIA report.
U.
S.
domestic crude production fell by 100,000 barrels per day to 11.
3 million b/d
last week.
The four-week average supply of U.
S.
crude products was 20.
906 million b/d, up 14%
from a year earlier.

Commercial crude excluding strategic reserves imported 5.
825 million b/d last week, down 169,000 b/d
from the previous week, the EIA report showed.
Commercial crude inventories, excluding strategic reserves, fell by 431,000 barrels to 426.
5 million barrels, down 0.
1 percent
.

The EIA report showed that EIA refined oil inventories in the United States fell by the largest
since the week of March 5, 2021 in the week ended October 15.
U.
S.
crude oil exports for the week ending October 15 were the highest
since the week of August 13, 2021.
In the United States, EIA Cushing, Oklahoma, crude oil inventories were at their lowest level
since October 2018 for the week ended October 15.
U.
S.
Midwest crude inventories fell to their lowest level
since September 2018 in the week ended Oct.
15.
U.
S.
gasoline inventories fell to their lowest level
since November 2019.

Japan has followed the example of the United States in urging major oil producers to increase oil production

As the energy crisis continues to spread, oil demand surges, and oil prices continue to rise, for example, U.
S.
oil has reached the $80 mark, a seven-year high, although affected by U.
S.
economic data
.

Recently, Japan also "followed the United States", saying that it would negotiate with major oil-producing countries to urge them to increase oil production
.
According to Japanese media reports on October 18, Japan's new Prime Minister Fumio Kishida has issued a directive requiring relevant departments to cooperate with the International Energy Agency (IEA) to make representations to major oil exporters, including Saudi Arabia, urging them to increase oil production; In addition, Kishida also stressed that we must always pay attention to the impact of high oil prices on people's livelihood, and the industries that have been affected must actively respond and cannot sit still
.

It is no wonder that Fumio Kishida is so concerned about high oil prices, public information shows that in Japan's energy structure, fossil energy such as oil and coal account for as much as 85%, and basically rely entirely on imports
.
As international oil prices continue to rise, Japanese fuel prices are also rising, taking consumers' more sensitive refined oil prices as an example, according to media reports on October 16, that week, Japanese gasoline prices have risen for six consecutive weeks, reaching 166 yen / liter, a seven-year record
.

It can be said that as oil prices continue to rise, more and more oil-related industries will be affected, such as food, household lotions, and the production of plastics, and Japanese consumers will also face increasing pressure
.

According to another analysis, on the one hand, Japan is the world's fourth largest oil importer, and rising oil prices will expand the country's trade deficit
.
Data show that Japan's trade deficit widened to 165.
8 billion yen in mid-to-early September due to an increase in oil imports; On the other hand, the continued rise in oil prices has increased the burden on Japanese companies, squeezing profits, which has caused unease among investors and may also trigger a decline
in the stock market.

In fact, in the face of the continuous rise in oil prices, the United States has repeatedly put pressure on OPEC+, and the news on October 19 said that the White House spokesman recently stressed at a press conference that "in order to solve the problem of rising fuel prices such as gasoline, all available pressure methods will continue to be used"
.
However, OPEC+ has been rejecting U.
S.
requests for a production increase and said it will maintain its previous production increase agreement of 400,000 b/d
.

The analysis pointed out that the oil market is currently in short supply, that is, OPEC+ is more dominant in bargaining, so the possibility of them "cutting off their own financial path" to increase production significantly is very low
.

OPEC+ is reluctant to increase production, and the United States can only find another way, such as increasing shale oil
production.
Analysts at data firm IHS Markit said U.
S.
crude oil production is expected to increase rapidly starting this year, becoming the fastest-growing supplier outside OPEC+, with private producers producing at least 400,000 b/d
.
However, there are also views that the old infrastructure and lack of investment in the United States will become obstacles to the expansion of shale oil production
.

European natural gas is in a hurry, and it is still unknown whether the Nord Stream 2 project can be used this winter

According to foreign media reports, the operator of the "Nord Stream-2" natural gas pipeline said on October 18 that the first of the two pipelines has been injected with technical test gas and can officially start operation only after obtaining a German trial operation
license.
However, the gas pipeline connecting Russia and Germany is controversial, and there are major differences between Germany and the United States;

According to reports, the Nord Stream 2 gas pipeline, funded by Gazprom and European investors, is expected to start supplying natural gas after obtaining a German trial operation license number, but this process may take several months, and it is still unknown whether it can be used this winter;

Nord Stream-2, which is 1,230 kilometers long, runs directly from Russia to the Mecklenburg-Western Pomeranian state in northeastern Germany and is expected to transport 55 billion cubic meters of natural gas
per year.
The operator alleges that such a supply is sufficient for 26 million households
.

In order to maintain pipeline air pressure to ensure future operations, Nord Stream 2 operators have injected about 177 million cubic meters of gas
into the first pipeline.
The operator noted that the test results "represent sufficient time to start pumping natural gas" and that pre-commissioning steps have begun on the second pipeline
.

Earlier, the International Energy Agency and some MEPs accused Russia of failing to do enough to increase gas supplies to Europe, but Russia stressed that it did not play any role
in the surge in European gas prices.
The Kremlin Palace also said that "Nord Stream-2" will alleviate the dilemma
of soaring prices in the European natural gas market due to insufficient supply.

The laying of the Nord Stream 2 pipeline began in 2018 and is scheduled to be completed
in 2019.
However, due to the opposition of the United States, the construction period was delayed
.

The United States has long opposed the Nord Stream 2 project, calling it a Russian geostrategic project, and has imposed sanctions
on some individuals involved in the construction of the pipeline.
Germany and Russia said the project was commercial
.
The Russian government said that the United States blocked the project in order to squeeze out Russia's energy market share in an attempt to sell more American natural gas
to Europe at a high price.

Russia hinted that without Nord Stream 2, there would be no additional European gas

Russia has signaled that it will not go to great lengths to provide Europe with additional gas to ease the current energy crisis unless it gets something in return: regulatory approval to deliver gas
through the Nord Stream 2 pipeline.

People close to gas giants Gazprom and the Kremlin reported that Russia wanted everyone to know that Europe was going to exchange for increased gas supplies — Nord Stream 2 was approved
by Germany and the European Union.

Last week, Russian President Vladimir Putin said at an energy conference that Russia could provide more gas, but he also regretted the slow progress in the approval of Nord Stream 2: If we can increase deliveries through this route, it will greatly ease tensions
in the European energy market.
However, due to administrative obstacles, we are currently unable to do so
.

The members of the upper house of the pro-Russian government recently said that we cannot just go to the rescue and make up for mistakes
that were not made by us.
We are fulfilling all contracts, all obligations
.
Everything else should be voluntary or reciprocal
.

Nord Stream 2 travels 1,200 kilometers
from Vyborg, Russia, through the Baltic Sea, Ukraine and Poland to Lubmin, Germany.
The gas pipeline has been completed, but is still awaiting regulatory approval before it can start supplying 55 billion cubic meters of gas
to Europe each year.
On Monday, Nord Stream 2 said its first production line could be ready to start operations but could not be shipped
until it received regulatory approval.

News that Gazprom had again bid for only a small amount of capacity, limiting the flow of gas to Europe via other routes, sent gas prices soaring
again on the day.
According to the Oxford Institute for Energy Research, although Russian exports to Europe have increased this year from last year's sluggish level, they still lag behind 2019 levels
.
Daily delivery flows fell in October and Gazprom's slow replenishment of storage facilities in Europe added upward pressure
on prices.

At present, the price of natural gas in Europe is more than five times higher than a year ago, and the soaring fuel cost has an increasingly negative impact on the European economy
.
If energy prices don't plummet, or don't plummet soon, Europe will be under increasing pressure to find natural gas
at all costs.
And the Russian side, as long as it complies with the contract, if it is willing to give up the marginal profit from additional gas exports, it is entirely at its own discretion
.

Russian gas is seen as Europe's main way
to avoid more severe supply shortages in winter.
Mainstream public opinion in Europe attributed the lack of gas to Russia, believing that this year's gas shortage in Europe was mainly "intentional" by Russia, and they have called on Russia to sell more natural gas
.
Russia blamed the European energy crisis on a hasty shift to reliance on spot markets and new energy
.

The options market is betting wildly that Brent oil prices will soar to $200 by the end of next year

With crude oil call options surging, there are signs that this year's rise in oil prices triggered by the energy crisis seems far from over
.

Traders in the options market are betting again that the price of U.
S.
WTI crude will soar above $100 as early as December from the current $82 per barrel
.
U.
S.
WTI crude prices have risen 10% so far this month and extended their year-to-date gains to 70%.

Since the oil price crash in 2014, this WTI crude oil has not touched the $100 mark
.

Bets on the other side of the Atlantic 600558 are even more aggressive
.
According to statistics, some traders are currently betting that Brent crude oil, one of the global benchmarks, will soar to a record high of $200 per barrel by December 2022
.

Options give investors the right to
buy or sell at a specified price on a specific date.
Traders often use options contracts to make directional bets or hedge their portfolios
.

And these latest surge of call options trading is a gamble that supply chain disruptions and regional shortages will continue to drive energy markets higher
, even as the global economic expansion may slow and concerns that rising oil and gas prices will dampen consumer spending.

These bets also indicate that investors in the energy market are beginning to be attracted by the small upfront investment and potential for fast high returns in options trading, and are beginning to rush into the options market, similar to the hot speculation experience of some Internet celebrity stocks in the United States at the beginning of this year
.

Mark Benigno, co-head of energy trading at StoneX Group Inc.
, said, "It's been a long time since I've seen such a crazy spectacle, with momentum and trends pointing higher
.
”

At present, the tight supply of energy markets has had a profound impact
on the global economy.
U.
S.
crude oil prices recently hit their highest level in nearly seven years, and natural gas prices have more than doubled this year to more than $
5 per million British thermal heat.
Some economists have warned that inflation is expected to persist for some time, while high energy prices could hit consumers, who had expected to spend more on heating this winter
.

Traders say this is the latest sign that with so many traders flooding the market, large swings are almost inevitable
.

According to CME Group, an average of 167,000 WTI options were traded per day in October, the most
since March 2020.
Statistics show that the call option with a strike price of $100 is currently the most widely held option
in the WTI crude oil market.
Traders noted that this situation is unusual because these execution levels are well beyond the current level
of oil price volatility.

Benigno noted that speculators have made aggressive bullish bets
on the oil market over the past year.
With the commodity price accelerating further recently, many of them appear to close their original options positions and peg their bets to higher prices, betting that oil prices will continue to soar
.

Of course, one thing the oil market needs to be careful about right now is that if economic data or other fundamental information clashes with the above bullish view, huge speculation may lead to a sharp one-day correction in the oil market
.

JPMorgan analysts said earlier this month that they expect Brent crude to trade at $84 a barrel by the end of the year
.
Bullish sentiment and positioning, combined with the potential for a cold winter, are expected to push prices higher, although lower demand could weigh on prices
.
They wrote in the report that oil fundamentals may end up disappointing these hyped funds
.
We also believe that downside risks are underestimated
.