EIA crude oil inventories fell more than expected, and U.S. oil rose $0.7 in the short term

On Wednesday (September 28) in the New York session, at 22:30 Beijing time, data released by the US EIA showed that commercial crude oil inventories in the United States in addition to strategic reserves fell more than expected in the week ending September 23, and refined oil inventories and gasoline inventories fell more than expected
.
U.
S
.
crude oil prices rose $0.
7 in the short term after the EIA data.

EIA crude inventories fell more than expected

Specific data show that the actual EIA crude oil inventory changes in the United States for the week ended September 23 decreased by 215,000 barrels, an expected increase of 443,000 barrels, and an increase of 1.
142 million barrels
in the previous week.

In addition, the actual announcement of a decrease in EIA gasoline inventories in the United States for the week ended September 23 was 2.
422 million barrels, an expected increase of 709,000 barrels, and an increase of 1.
569 million barrels in the previous week; the actual announcement of a decrease in EIA refined oil inventories in the United States for the week ended September 23 was 2.
892 million barrels, an expected decrease of 69,000 barrels, and an increase of 1.
231 million barrels
in the previous value.

The EIA report showed that U.
S.
crude oil exports rose by 1.
106 million b/d to 4.
646 million b/d
in the week of September 23.
U.
S.
domestic crude oil production fell by 100,000 barrels per day to 12.
000 million b/d
in the week of September 23.
The four-week average supply of U.
S.
crude oil products was 19.
728 million b/d, down 3.
06%
from a year earlier.
U.
S.
Strategic Petroleum Reserve (SPR) inventories fell by 4.
575 million barrels, or 1.
07%,
to 422.
6 million barrels in the week of September 23.

The EIA report showed that the United States imported 6.
449 million b/d of commercial crude oil excluding strategic reserves in the week of September 23, down 498,000 b/d
from the previous week.
Commercial crude inventories, excluding strategic reserves, fell by 215,000 barrels, or 0.
05%,
to 431 million barrels.

The EIA report showed that U.
S.
EIA Strategic Petroleum Reserve inventories for the week ended September 23 were the lowest
since the week of July 27, 1984.
U.
S.
EIA refined oil inventories fell by the week to September 23 by the largest since the week
of April 8, 2022.

US crude oil price 5-minute chart displays

Market fears of a global economic slowdown are intensifying

As major central banks continue to raise interest rates sharply, market fears of a global economic slowdown are intensifying
.
Last week, the Federal Reserve raised interest rates by 75 basis points, and other major global central banks accumulated 425 basis points of interest rate hikes, adding to market concerns about the outlook for recession and clouding
the outlook for crude oil demand.
Therefore, international oil prices remain on the defensive, as falling demand means lower
prices.
Sources said that no matter how much it costs economic growth, more and more central banks are forced to take unconventional measures, and economic demand will be hit, which could help the crude oil market rebalance
.

U.
S.
housing building permits plunged 10.
0% in August, the lowest level
since June 2020.
This is one of the more forward-looking indicators of the property market, indicating that the future risks for the sector are huge
.
The US benchmark 10-year Treasury yield hit 3.
56%, the highest since April 2011, and the closely watched 2-year/10-year yield spread inverted further, a leading indicator
of a recession.
According to the Atlanta Federal Reserve's GDPNow forecast, the U.
S.
economy is expected to grow at an annual rate of 0.
3 percent in the third quarter, down from a previous forecast of 0.
5 percent
.
The Atlanta Fed explained in the report that the third-quarter residential investment growth forecast in Nowcast fell from -20.
8% to -24.
5%
following the release of the U.
S.
Census Bureau's housing start report this morning.

NDR, the leading U.
S.
investment research firm, currently puts a 98% chance of a global recession, triggering a "severe" recession signal, and the model's only other times such high data come during previous severe recessions, such as 2020 and 2008-2009, when selling pressure on global equities is still mounting
.
U.
S.
stocks sank deeper in a bear market on Monday, with the S&P 500 and the Dow closing lower on investor concerns that the Federal Reserve's aggressive anti-inflation actions could tip the U.
S.
economy into a deep recession
.

The Fed's hawkish tone continues to weigh on oil prices

As the Federal Reserve raised interest rates by 75 basis points three times in a row this month, causing major institutions to further cut their U.
S.
growth forecasts, investors took out long positions
in crude oil.
Powell expects interest rates to reach 4.
6%
by the end of 2023.
This guidance has been sharply revised
up from the previous 3.
8%.
In addition, the unemployment rate is expected to rise to 4.
1%.

A huge task comes with great sacrifice, and economic growth will face severe pain
from the pace of interest rate hikes.
The decline in economic growth expectations will eventually reduce crude oil demand
over a longer period of time.

Boston Fed Chairman Collins said in his first public statement on Monday that the Fed needs to reduce unacceptably high inflation, which will lead to higher unemployment, but a recession is not inevitable
.
The goal of a smaller slowdown is challenging but achievable
.
It is important to see clear and convincing signs
that inflation is declining.
Committed to reducing inflation to 2%.

If higher inflation expectations are entrenched, it will be harder to curb inflation
.

Cleveland Fed President Mester said in a speech prepared for submission to MIT on Monday that if mistakes are likely, it's better
for the Fed to do too much than to do too little.
When there is an uncertain outlook, policymakers are better off taking more aggressive action, because proactive and pre-emptive action can prevent the worst-case outcome from actually happening
.

A higher dollar index puts pressure on oil prices

The dollar index, which measures the greenback against a basket of six currencies, rose sharply to a new more than 20-year high, putting pressure on
crude oil and dollar-denominated commodities.
The data shows that the impact of a strong dollar on oil prices is the greatest
in more than a year.
Bob Yawger, head of energy futures at Mizuho Bank, said: "It's hard for anyone to expect oil prices to rebound
when the dollar is so expensive.
Central banks in many oil-consuming countries have raised interest rates, raising fears of an economic slowdown, which could squeeze oil demand
.

The Chicago Fed's national activity index fell to 0.
0 in August versus market expectations at 0.
09 and revised upward to 0.
29
in the previous month.
In addition, according to the Federal Reserve Bank of St.
Louis (FRED), based on 10-year and 5-year breakeven inflation rates, US inflation expectations suggest that the indicator updated its multi-day low on Monday
.
At the same time, long-term inflation expectations fell to their lowest level
since July 13, 2022.
In contrast, the 5-year benchmark index fell to its lowest level
since June 2021.

Brown Brothers Harriman economists are optimistic about the dollar against the backdrop of a general risk haven environment and a hawkish decision by the Federal Open Market Committee (FOMC
) last week.
Markets were already nervous last week as major central banks aggressively tightened monetary policy, but the huge mistakes in UK fiscal policy added fuel to the fire
.
With global economic growth also slowing significantly, the environment for risk assets remains challenging
.
We expect the dollar to continue to strengthen in this environment, although expectations for Fed tightening remain high
.
Another 75 basis point rate hike by the Fed on November 2 has almost completely been priced in by the market, and another 50 basis point rate hike on December 14 has also been priced in
.

The geopolitical situation has warmed up to support oil prices

Russian President Vladimir Putin's announcement to mobilize some troops has also reignited geopolitical concerns related to Ukraine and may provide some support
for oil prices.
The head of commodity research at ING said the escalation would lead to increased uncertainty about Russia's energy supply, a move that could lead to calls from the West for more aggressive sanctions against Russia
.

Ukrainian President Volodymyr Zelensky said that perhaps "Putin's nuclear threat is a bluff, but now, it may be a reality.
"
At the same time, the United States warned of "catastrophic consequences"
if Moscow used nuclear weapons in Ukraine.
Earlier, the Russian foreign minister said that the area where the referendum on joining Russia would be fully protected
if it joined Russia.

The continuation of the Russia-Ukraine conflict will still have some impact on the crude oil market, and EU sanctions banning imports of Russian crude will come into effect in December, which may lead to tighter supply, providing some support
for oil prices.
Irina Slav, an analyst at energy website oilprice, said that in the face of many challenges, crude oil demand has remained resilient, and OPEC+'s production target has fallen behind the rated target of more than 3.
5 million barrels per day; As Asian economies reopen and Russian crude is forced out of the market, the risk of a supply shock increases
.

The European Union plans to delay capping Russian crude prices amid disagreements
among member states.
Countries such as Cyprus and Hungary have expressed opposition to proposals
to cap oil prices, the sources said.
The European Commission met with member states over the weekend to try to reach a compromise
on a package of restrictive measures.
EU member states are likely to push for a preliminary agreement
ahead of an informal meeting of EU leaders in Prague on October 6.

The market is focused on the OPEC+ meeting early next month

Market attention is turning to what OPEC and its allies, including Russia, will do when OPEC+ meets on October 5, having agreed to small production
cuts at its last meeting.
However, OPEC+ production is well below target, meaning further cuts may not have much impact
on supply.

Iraqi Oil Minister Ihsan Abdul Jabbar said OPEC+ was monitoring oil prices and hoped the market was balanced
.
We don't want oil prices to rise or collapse
significantly.
We have entered a challenging period
.
Global factors have led to a decline [in oil prices], most importantly slower growth and rising
inflation.

OPEC needs to act to boost oil prices
.
Oil industry expert and founder of Black Gold Investors Gary Ross said crude inventories are expected to increase in the coming months, and OPEC will have to cut production by 500,000-1 million barrels per day to maintain oil prices
of around $90 per barrel.
With the risk of recession in the fourth quarter and relatively weak fundamentals coming in, supply and demand will rebalance, which will lead to an increase
in inventories.
If OPEC does not reduce supply, the crude oil market may turn to futures premiums, and some crude oil products will have a hard time finding demand
.