EIA crude oil inventories unexpectedly fell sharply, oil prices held steady at high levels, and supply disruptions always supported oil prices

On Wednesday (March 2) during the New York session, at 23:30 Beijing time, data released by the U.
S.
EIA showed that commercial crude oil inventories in the United States, excluding strategic reserves, unexpectedly fell sharply in the week ended February 25, and refined oil inventories and gasoline inventories both fell
slightly.
After the EIA data, U.
S.
crude oil prices were basically stable
in the short term.

EIA crude oil inventories unexpectedly plummeted

Specific data show that the EIA crude oil inventory changes in the United States for the week ended February 25 actually decreased by 2.
597 million barrels, an expected increase of 2.
287 million barrels, and the previous value increased by 4.
514 million barrels
.

In addition, EIA gasoline inventories in the United States for the week ended February 25 actually decreased by 468,000 barrels, compared with an expected decrease of 1.
298 million barrels and a decrease of 582,000 barrels in the previous month, and EIA refined oil inventories in the United States actually decreased by 573,000 barrels in the week ended February 25, compared with an expected decrease of 1.
7 million barrels and a decrease of 584,000 barrels
in the previous month.

The EIA report showed that U.
S.
domestic crude oil production last week was 11.
6 million b/d, unchanged
from before.
The four-week average supply of U.
S.
crude products was 21.
734 million b/d, up 11%
from a year earlier.
U.
S.
crude exports rose by 1.
11 million b/d to 3.
796 million b/d
last week.
U.
S.
Strategic Petroleum Reserve (SPR) inventories fell by 2.
364 million barrels, or 0.
41%,
to 580 million barrels last week.

Commercial crude oil, excluding strategic reserves, imported 5.
767 million b/d last week, down 1.
061 million b/d
from the previous week, according to the EIA report.
Commercial crude inventories, excluding strategic reserves, fell by 2.
597 million barrels to 413.
4 million barrels, down 0.
6%.

EIA inventories in the United States for the week ended February 25 were the lowest
since the week of August 16, 2002, according to the EIA report.
U.
S.
crude oil exports for the week ended Feb.
25 were the highest
since the week of July 9, 2021.
U.
S.
commercial crude oil imports excluding strategic reserves in the week ended Feb.
25 were the lowest
since the week of Sept.
10, 2021.

The EIA report showed that the amount of crude oil imported by the United States from Russia fell to zero
last week.
U.
S.
Midwest crude inventories fell last week to their lowest level
since December 2014.
Cushing, Oklahoma, crude inventories fell last week to their lowest level
since September 2018.
Last week, gasoline inventories in the U.
S.
Midwest rose to their highest level
since February 2019.

According to the EIA report, analyst Devika Krishna Kumar pointed out that US crude oil imports from Russia fell to zero last week, which may not be surprising
.
In January, U.
S.
crude imports from Russia were zero
for three consecutive weeks.
Traders said there was little sign of new orders
.
Russian crude exports to the United States so far in 2022 could record their slowest annual growth since 2017, according to shipping intelligence firm Kpler
.

Global crude oil, natural gas, wheat and edible oil prices have soared amid supply disruptions due to sanctions

The escalation of the conflict between Russia and Ukraine, the imposition of sanctions by the West on Russia, disruption and air and sea transport, threatening trade in raw material goods
.

After negotiations failed to bear fruit, a large Russian armored unit is advancing
towards Kiev.
The goal of the Russian army is to implement the demilitarization and denazification
of Ukraine.
On Tuesday, several shipping groups halted operations in Russia, while airlines canceled cargo flights after Russia and Europe imposed airspace bans on each other, leading to growing
concerns about supply chain blockages.

Analysts said the current situation is very volatile, shows no signs of cooling down, and could end up with an outcome
that is unfavorable to all parties.
From a fundamental perspective, commodity demand remains strong
.
Prices of commodities in which Russia plays a major supply role have soared across the board, including energy, metals and grains
.

Because concerns about supply disruptions outweighed the impact
of U.
S.
plans to release strategic stocks.
While the U.
S.
government avoided direct sanctions on Russian oil and gas, the U.
S.
and allies kicked Russian banks out of the SWITF global bank settlement system on Saturday, causing serious disruptions to all Russian commodity exports
.
Russia is a major producer of natural gas and an important supplier to Europe
.

At the same time, crude oil and wheat prices have also soared
.
Analysts said that the situation in Ukraine is still fragile, and Western sanctions on Russian finance and energy will lead to an energy crisis that will continue to ferment, and crude oil prices will rise well above $100 per barrel in the short term, or even higher
if the conflict escalates further.

Iraq suspended production from two major oil fields in the south, damaging nearly 500,000 barrels per day

Iraq this week suspended oil production from two fields in the south of the country, which together produce close to 500,000 barrels
per day.
This means that the oil production capacity of the second-largest member of the oil exporting country (OPEC) is limited
at a time when the Russia-Ukraine war and global supply tightness have caused oil prices to soar.

Iraqi national oil officials said Friday that the country suspended the West Qurna 2 field, which has a capacity of 400,000 barrels per day, for maintenance work, which includes the construction of new wells and connecting new pipelines, and that the Iraqi government will try to make up for the lost capacity
.
It is reported that the closure of the West Qurna 2 field will last until March 14
.

Dhi Qar, Iraq's state-owned oil company, announced on Friday that it had suspended work
at the Nasiriya field due to intensifying protests due to safety concerns for workers.
The Nasiriya field can produce up to 80,000 barrels
per day.

Oil production of 480,000 per day accounts for nearly 0.
5% of global oil supply, and the oil market is currently in a vulnerable period
.
As Russia embarks on a military operation against Ukraine this week, markets are worried that Western sanctions will impose sanctions on Russia's energy sector, adding to the current supply tensions
.

On Thursday, Brent crude futures topped $105 a barrel for the first time since 2014, and despite a slight retreat on Friday, they are still up 26%
this year.

Iraq produced 4.
16 million barrels per day of oil in January, below its target
of nearly 4.
3 million barrels, the data showed.
It is worth mentioning that Iraq has repeatedly stated that it can produce up to 5 million barrels of oil
per day.

Iran's return to the crude oil market has entered a critical stage, and three important issues have not yet been discussed

Iran said on Monday that it could restart the 2015 nuclear deal
if Western countries made a political decision to address the remaining three issues.
At present, indirect negotiations between Iran and the United States have entered a critical stage
.

A spokesman for Iran's Foreign Ministry noted that pending issues include the extent to which sanctions will be lifted, assurances that the United States will not withdraw from the deal again, and resolving issues
related to traces of uranium found at several undeclared old Iranian sites.

After 10 months of negotiations in Vienna, progress was made in resuming a deal to limit Iran's Tehran nuclear program in exchange for sanctions relief, and the United States withdrew from the deal
in 2018.
But both Iran and the United States warn that there are still some major differences to overcome
.

"A friendly agreement is possible, but three key issues remain to be resolved
.
The United States and European powers have yet to make political decisions on these major issues," Iranian Foreign Ministry spokesman Saeed Khatibzadeh said
at a weekly news conference.

"We believe that we need an appropriate way to resolve the remaining issues regarding the lifting of sanctions on Iran, assurances from the United States and political claims, which are addressed to our peaceful and civil nuclear programs
," Khatibzadeh said.
”

Iran's chief nuclear negotiator, Ali Bagheri Kani, who flew to Tehran last week for consultations with Iranian officials, said: "We have returned to the Vienna negotiations and continue the negotiations
with a clear agenda.
" "The return of the United States to the nuclear deal will not be a one-day process, and the United States side will carry out multiple verifications
.
" Khatibzadeh said
.

Diplomats from all sides of the talks said the talks had reached a critical stage, while Iran refused to set any "fabricated deadlines"
for the talks.
Iran's 2015 deal with world powers limited uranium enrichment activities on the Iranian side to make it harder to develop materials that could be used in nuclear weapons, in exchange for lifting sanctions on Iran
.

But in 2018, former U.
S.
President Donald Trump withdrew from the deal and reimposed sanctions that greatly damaged Iran's oil-dependent domestic economy
.
In response, Tehran violated the nuclear limits
in the agreement.

Some analysts believe the United States may also use the return of Iranian crude to the market as a political leverage to put pressure on Russia, and a senior European Union official recently said that the resumption of Iran's 2015 nuclear deal is "very, very close"
.

The International Energy Agency is reported to have urgently released 60 million barrels of crude oil to calm the soaring oil prices

People familiar with the matter revealed that after the situation in Russia and Ukraine pushed crude oil to more than $100 / barrel, the United States and other major economies agreed
on a joint release of oil stocks.

The International Energy Agency (IEA) has agreed to deploy 60 million barrels of oil
from global stockpiles, sources said.
This will be the second time in months that the United States has released crude oil inventories
.
The U.
S.
Department of Energy declined to comment
.
The IEA could not be reached for comment
.
The IEA's 30 member states include the United States, Japan, Germany and France
.

The IEA was established during the 1973-74 oil crisis and its initial role was to coordinate responses
to oil supply emergencies.
As energy markets change, the IEA's mission has changed and expanded to include a balanced energy decision-making concept
based on the "4 E's" of improving energy security, economic development, environmental protection and global participation.
As an energy policy advisor to 29 member states, the IEA works with member states to ensure energy reliability, economy and sustainability
for their citizens.

After Russia launched its military operation last week, oil prices hit their highest value
since 2014.
Last Wednesday, the Biden administration intended to lower oil prices before the fall elections, and the United States and its allies are considering another emergency supply, namely the release of the Strategic Petroleum Reserve SPR
.
As of January this year, the 50 million barrels of strategic oil reserves announced by Biden last year completed the release
of nearly 40 million barrels.
The current level of the US Strategic Petroleum Reserve has fallen to just over 580 million barrels, the lowest level
since 2002.

Goldman Sachs raised its one-month price forecast for crude oil to $115

Goldman Sachs believes that only demand destruction can stop oil prices from rising
after further restrictive measures against Russia by the United States and the European Union.
The bank raised its one-month price forecast for Brent to $115 from $95 a barrel, posing significant upside risks
if the situation escalates further or the disruption is extended.

Analysts at Goldman Sachs, including Damien Courvalin and Jeff Currie, said in a Feb.
27 report that Western sanctions will be significantly tightened
after announcing a ban on some Russian banks from using the SWIFT international payment system and targeting Russia's central bank reserves.
While the equity split could allow Russia to continue trading energy and food, barriers erected for payments should exacerbate already obvious commodity supply shocks
, they said.

"Commodity markets need to reflect not only the difficulty of paying for Russian exports, but also the risk that Russian commodities will eventually be restricted by the West," the analysts said, adding that the United States no longer rules out such an outcome
.

Goldman Sachs said that if it needs to reduce oil demand by 2 million to 4 million barrels per day to make up for a month's export losses from Russia, then the short-term upside range for oil prices is $110-120
.
With Russia exporting about 7.
3 million barrels per day of offshore crude oil and petroleum products, a price-triggered shale supply response will no longer be an appropriate rebalancing mechanism
to deal with such potentially large shocks, the report said.

Goldman Sachs said the only possible short-term supply response would come from the OPEC+ coalition, which will meet
later this week.
A surge in Saudi and UAE oil production, combined with the lifting of U.
S.
sanctions on Iran, could add 2 million barrels per day to global oil supply in the coming months, and internationally coordinated releases of oil reserves could help bridge the shortfall
.
But this will come at the cost of depleting spare capacity, driving up prices
.

Agencies expect oil prices to remain upward

Does an oil price break 100 mean peaking? Experts believe that if oil prices remain high for a long time, it will bring stagflationary pressure
.
This is the third time in history that international oil prices have exceeded 100, and the long-term impact needs to be further observed, but oil prices have rushed from a low of 2020 to more than $100 in a short period of time, reflecting the market's concern
about the situation in Russia and Ukraine.

The current global economic situation lacks support for high oil prices, and now that the epidemic is not over, there is no significant
increase in demand.
Major geopolitical events can affect oil prices, but the impact is often short-term
.
Once the situation between Russia and Ukraine eases, its impact on oil prices will be reduced
.
Oil prices are actually a financial concept, and the sharp rise in oil prices is actually a gamble on financiers betting on the development of
geopolitical events.

As for the future oil price, experts believe that it depends on the length of the war, including where the borders of the Russian war are, and whether its purpose can be achieved
.
It also depends on the breadth and depth
of sanctions imposed on Russia by European and American countries.

Experts believe that maintaining high oil prices is a high probability event, since Europe is highly dependent on Russia
for gas supplies.
There are two routes for Russian gas to Europe, one goes to Ukraine and the other is Nord Stream 2
.
The latest news shows that Germany suspended the approval of the Nord Stream 2 gas pipeline
.

Sino Analytica Fund said: From the recent forecasts of major energy institutions, the supply and demand situation in the crude oil market will remain tight in the short term, but it tends to be loose
throughout the year.
On the demand side, the IEA forecasts that global oil demand will increase by 3.
2 million bpd year-on-year in 2022; OPEC's forecast is more optimistic, with a year-on-year increase of 4.
2 million b/d in 2022 (5.
7 million b/d in 2021).

Whether based on IEA forecasts or OPEC forecasts, global crude oil demand will reach or slightly exceed the previous high in 2019 in
2022.
On the supply side, the EIA raised its forecast for U.
S.
crude oil production in 2022 to 12 million barrels per day, an increase of 800,000 barrels per day
year-on-year.
As oil prices have recently outperformed market expectations, further upward revisions to shale capital expenditure and production forecasts for 2022 cannot be ruled out
.
In terms of OPEC+, the OPEC production baseline was raised by 1.
7 million barrels at one time from May, focusing on the actual production changes
of OPEC+ in the future.
”

Sino Analytica Fund further pointed out that the crude oil market still maintains the tone of improvement in the supply and demand pattern, geopolitical conflicts will increase the volatility of crude oil prices, Russian crude oil production accounts for about 12% of the world, the subsequent geopolitical events have a far-reaching impact on the crude oil market, short-term oil prices are still likely to rise, and the average price of crude oil throughout the year is expected to maintain a high level
.

GF believes that, according to the data forecast, the total capital expenditure of major oil companies is unlikely to recover to the level of 2019 until 2025; On the other hand, OPEC+ production has not reached the quota cap for eight consecutive months and has not made any commitment to expand the quota, which has led to rising concerns about insufficient crude oil supply
.
At the same time, global crude inventories have fallen to their lowest level in the same period in the last six years, indicating the tightness of the
spot market.
In the context of supply and demand imbalance, superimposed inventories are at a low level, and international oil prices are extremely vulnerable to event-driven rises
.
At present, the global geopolitical situation is constantly in turmoil, and crude oil supply interruptions occur from time to time, resulting in international oil prices that are prone to rise and fall
.
”

Looking ahead, the current situation of short supply in the international crude oil market still exists, and under the background of relatively certain demand increments, supply increments continue to be limited, resulting in oil prices are expected to remain high, and there is no short-term trend of easing fundamental shortages
.
On the other hand, geopolitical conflicts are expected to continue and are expected to increase the risk premium of crude oil, further driving oil prices higher
.