EIA crude oil inventories unexpectedly increased, but refined oil inventories decreased, and U.S. oil stocks basically held steady at daily highs in the short term

On Thursday (June 29) during the New York session, at 23:00 Beijing time, data released by the U.
S.
EIA showed that the United States commercial crude oil inventories excluding strategic reserves in the week ended July 1 unexpectedly exceeded expectations, refined oil inventories were lower than expected, and gasoline inventories were lower than expected
.
After the EIA data, U.
S.
crude oil prices basically held steady at daily highs
in the short term.

EIA crude oil inventories increased sharply more than expected

Specific data showed that the EIA crude oil inventory changes in the United States for the week ended July 1 actually increased by 8.
235 million barrels, an expected decrease of 1.
55 million barrels, and a decrease of 2.
762 million barrels
in the previous month.

In addition, EIA gasoline inventories in the United States actually decreased by 2.
497 million barrels in the week ended July 1, compared with an expected decrease of 1.
05 million barrels and an increase of 2.
645 million barrels in the previous month; EIA refined oil inventories in the United States actually decreased by 1.
266 million barrels in the week ended July 1, expected to increase by 1 million barrels and increased by 2.
559 million barrels
in the previous month.

The EIA report showed that U.
S.
domestic crude oil production remained unchanged
at 12.
100 million b/d last week.
U.
S.
crude exports fell by 768,000 b/d to 2.
612 million b/d
last week.
The four-week average supply of U.
S.
crude products was 20.
017 million b/d, down 4.
42%
from the same period last year.

Commercial crude excluding strategic reserves imported 6.
839 million b/d last week, up 841,000 b/d
from the previous week, according to the EIA report.
Commercial crude oil inventories, excluding strategic reserves, rose by 8.
234 million barrels, or 1.
98%, to 424 million barrels
.

The EIA report shows that EIA Strategic Petroleum Reserve inventories in the United States for the week ended July 1 are the lowest
since the week of December 6, 1985.
In the United States, EIA refined oil inventories fell at the fastest rate in the week ended July 1, the largest
since the week of April 29, 2022.
U.
S.
commercial crude inventories excluding strategic reserves in the week ending July 1 were the highest
since the week of May 6, 2022.
Last week, total U.
S.
exports of petroleum products reached a record high
.

The EIA report showed that U.
S.
Strategic Petroleum Reserve (SPR) inventories fell by 5.
84 million barrels, or 1.
17%,
to 492 million barrels last week.
U.
S.
EIA gasoline production for the week ended July 1 was 849,000 b/d vs 143,000 b/d
previously.
U.
S.
EIA Strategic Petroleum Reserve inventories for the week ending July 1 were -5.
84 million barrels vs -6.
95 million barrels
prior.
EIA refinery equipment utilization in the United States for the week ended July 1 was 94.
5% vs 95.
1% expected and 95%
prior.
U.
S.
imports of Saudi crude fell 43 percent
.

Expectations of slower global economic growth hit the oil consumption outlook

Expectations of slower global economic growth hit the oil consumption outlook
.
At present, global oil consumption is still in the post-epidemic recovery stage, especially subject to the epidemic, and global jet fuel consumption is still far from
the pre-epidemic level.
At the same time, due to a series of sanctions brought about by the Russia-Ukraine conflict and the tightening of financial conditions, global economic growth is under significant pressure in the future, so it is expected that oil consumption will also be hit
in the medium and long term.

Recently, a number of institutions have lowered their global oil consumption forecasts this year, and EIA, IEA and OPEC believe that the growth rate of global oil consumption in 2022 will be 2.
28 million barrels / day, 3.
37 million barrels / day and 1.
8 million barrels / day, respectively, which is significantly lower than the forecast at the beginning of the year
.
In addition, high oil prices will also suppress oil consumption to a certain extent, according to historical data, when oil prices are above $100 / barrel, oil consumption and oil prices show a negative correlation
.
Since March this year, oil prices have been above $100 per barrel for most of the time, which has imposed certain restrictions
on oil consumption.

The easing of global travel restrictions has boosted the recovery
of jet fuel consumption.
Due to the easing of travel restrictions in many countries around the world, the recovery of the European and American aviation industry has become increasingly evident in recent months, and there was a wave
of international travel bookings in April and May this year.
At present, the capacity of international flights in Europe and the United States is significantly faster than that of Asia and other places
.

The cracking spread of refined oil products in the United States is high, and refinery starts are high
.
After the conflict between Russia and Ukraine, due to the decline in the supply of refined oil products in Russia and the expected growth of seasonal demand, the US market experienced a shortage of gasoline and diesel supply, and the gasoline and diesel cracking price spread strengthened sharply, and promoted the enthusiasm of
refinery production.
From the perspective of terminal consumption, the United States has entered the summer consumption season, gasoline consumption will increase seasonally, and due to the current US gasoline inventory continues to decline, the arrival of the consumption season will aggravate the tight market supply pattern
.

However, the current high oil prices have suppressed terminal oil demand to some extent, as US gasoline prices have risen to an all-time high, household consumption has been affected to a certain extent, and US gasoline and diesel deliveries in May and June have declined year-on-year, which means that high oil prices have discounted demand in the US consumption season
.
From the high-frequency data analysis of the past two weeks, the US crude oil side maintained destocking, but the refined oil end showed signs of accumulation, and in the second half of the year, with the gradual deepening of the Fed's interest rate hike, the operating costs of real enterprises will gradually rise, and oil consumption is expected to be suppressed
.

In addition, the repeated domestic epidemic in the first half of the year also affected oil consumption, which in turn dampened the enthusiasm of
refinery starts.
From the perspective of refinery demand, affected by the decline in demand and lower profits in the first half of the year, the operating load of domestic main and local refineries continued to decline after late March, but since mid-May, the local refinery operating load has rebounded, and the main refinery start has also rebounded after June, but it is still far below the level at the beginning of
the year.
At present, the overall improvement of the domestic epidemic situation, in the case of the gradual relaxation of prevention and control measures, terminal oil consumption will gradually recover, it is expected that the level of refinery operation will be further improved in the second half of the year, especially the operating rate of the main refinery has greater room for growth, which in turn will drive the recovery
of crude oil processing demand.

The global manufacturing PMI fell in June, and the stability of the global economic recovery weakened

According to data released by the China Federation of Logistics and Purchasing on the 6th, the global manufacturing purchasing managers' index (PMI) in June was 52.
3%, down 1.
2 percentage points from the previous month, hitting a new low in the year, indicating that the growth rate of the global manufacturing industry has slowed down, and the slowdown is faster
.

In the second quarter, the average global manufacturing PMI was 53%, down 1.
6 percentage points
from the first quarter.
In terms of subregions, in June, the European manufacturing PMI was 52.
4%, down 1.
7 percentage points from the previous month, and has fallen for five consecutive months month-on-month, hitting a new low
in the year.
The manufacturing PMI of Germany, the United Kingdom, France and other countries has decreased
significantly from the previous month.
It shows that the growth rate of European manufacturing has shown a continuous slowdown, and the slowdown has accelerated
.

In June, the Americas manufacturing PMI was 53.
2%, down 2.
6 percentage points from the previous month and hitting a new low
for the year.
In June, the African manufacturing PMI was 50%, down 1.
7 percentage points from the previous month, ending the two-month month-on-month upward trend, indicating that the growth rate of African manufacturing has slowed down from the previous month, and the downward pressure has increased
.
In June, the Asian manufacturing PMI was 51.
4%, up 0.
1 percentage points from the previous month and rising
for the second consecutive month.

According to the latest World Bank report, the global economic growth forecast for 2022 has been lowered to 2.
9% due to the impact of the new crown epidemic on the global economy exacerbated by the Russia-Ukraine conflict, with the risk of
stagflation.
World Bank President Malpass believes that the global economy is once again in danger and that for many countries a recession will be "inevitable.
"

The analysis said that the change in the composite index indicates that the growth rate of the global manufacturing industry has slowed down, and the slowdown is relatively fast
.
The sharp slowdown in the growth rate of manufacturing in Europe and the United States is the main factor
for the weakening of the stability of the global economic recovery.
The impact of the epidemic and geopolitics on the global economy still exists, and the stability of the industrial chain and supply chain is still not solid
.
Rising inflationary pressures have forced many countries to accelerate the pace of interest rate hikes, and the global loose monetary environment is shifting
.
Continuing to strengthen international cooperation and promoting multilateral cooperation remains the only way
for the stable recovery of the global economy.

Workers in Norway's offshore oil and gas fields went on strike, but the strikes quickly subsided

Workers in Norway's offshore oil and gas fields reportedly began a strike on Tuesday, which will lead to reduced
oil and gas production.
Workers are demanding higher wages to offset soaring inflation
.
Gas supplies in Europe are particularly tight after Russia cut exports, and the strike comes amid
high oil and gas prices.

The Norwegian government said it was following the conflict
"closely".
In exceptional circumstances, it may intervene to stop the strike
.
Statoil has said the strike on Tuesday will reduce oil and gas production by 89,000 barrels
of oil equivalent per day.
The strike would reduce the country's daily gas production by 292,000 barrels of oil equivalent, or 13 percent
, by Wednesday, the Norwegian Oil and Gas Association (NOG) said on Sunday.

However, thanks to the intervention of the Norwegian government, the strike by oil and gas workers was put to rest
.
It is understood that the strike will not have much impact on gas supplies at first, but if the strike escalates, Norwegian gas exports could be reduced by 13%
on Wednesday.
In addition, Russia returned to previous levels
on Tuesday after cutting gas flows from the Nord Stream 1 pipeline in recent weeks.

It is understood that the pipeline will undergo regular annual maintenance from July 11 to 21, when flow will drop to zero, but there are concerns about the speed at which flow will resume after that; Goldman Sachs analysts said this week that it is expected that it will be difficult to fully recover
after the traffic.
The German government says gas shortages could trigger a "Lehman Brothers" style bankruptcy as the country's businesses and consumers face energy exhaustion
.

OPEC+'s ability to increase production is in doubt, or it may not be able to curb the long-term rally in oil prices

OPEC+ has agreed to accelerate its planned production increases this summer, but investment restrictions and political instability mean most members are unable to provide additional supplies
.
Analysts are now even skeptical
about how much additional capacity OPEC+'s two major oil exporters, Saudi Arabia and the United Arab Emirates, can deploy.

Last week, French President Emmanuel Macron told the U.
S.
president at the G7 summit that UAE President Mohammed bin Zayed revealed that the UAE's oil production has reached its "maximum" and that Saudi Arabia can only "increase production a little more.
"
While the UAE was quick to clarify that the "maximum" output only referred to its OPEC+ quota, questions remained
about the ability of the two exporters to increase production.

Official Saudi data shows that the country's crude oil production can reach 12 million barrels per day, about 1.
5 million barrels
above current levels.
But data compiled by the media showed that Saudi Arabia's previous highest monthly production level was only 11.
6 million bpd
recorded in April 2020.

Some of the latest data suggests that OPEC+ can do little to help curb oil prices
.
OPEC production fell by 120,000 barrels per day in June, the second consecutive monthly decline
, the survey showed.
According to media reports last week, OPEC+ producers have supplied more than 500 million barrels
of oil to the global market in the past two years than they promised.

Libya, which is not part of the OPEC+ deal, saw the biggest drop in production in June, followed by Nigeria, which is estimated to have seen its output fall by between 80,000 and 100,000 b/d
last month.
According to the survey, production and exports of Iraq, OPEC's second-largest oil producer, also fell
.
The survey and other shipping data suggest that OPEC continues to underperform on its collective production targets, with market supply well below the monthly nominal increase claimed by OPEC+ Group
, according to the analysis.

In May, OPEC+ was estimated to be 2.
695 million b/d
behind its overall output target due to Western sanctions against Russia and capacity constraints from several other producers that could not meet their quotas.
Earlier this week, OPEC+ confirmed a 648,000 b/d increase in August, which would effectively cancel all production
cuts that began in May 2020 in response to a collapse in demand.

Although oil prices have fallen in the short term, most institutions still believe that oil prices will remain high in the future

With the continuous geopolitical tension and the increasingly severe inflation situation, international oil prices have been running
at a high level.
But in recent times, oil prices have plunged
frequently.
A number of factors caused oil prices to fall.

There are many reasons for the recent decline in oil prices: on the one hand, global central bank tightening, investors' fears of a global recession have increased, and the outlook for crude oil demand has weakened, putting downward pressure
on oil prices.

As consumers suffer from skyrocketing oil prices, the United States desperately wants oil prices to cool
.
To this end, the United States has repeatedly released strategic crude oil to increase marginal supply and curb the rise
in oil prices.
Oil prices have fallen as the pandemic and rising inflation have disrupted crude oil demand, and now that U.
S.
gasoline demand is showing signs of weakness, the market outlook is difficult to say optimistic
, leading to lower oil prices.

A number of institutions believe that in the medium and long term, international crude oil still shows a lack of supply elasticity, and oil prices will remain high for a period of time in the future
.

First, despite OPEC+'s announcement of an increase in production, many parties are skeptical about its ability to increase production because its main members Saudi Arabia and the United Arab Emirates are approaching their production capacity
.

Secondly, the current supply chain bottleneck of U.
S.
shale oil restricts the production capacity of U.
S.
crude oil, and the marginal increment of each oil product supply side is limited or promotes the price of various oil products to rise
more than expected.

Third, under the current geopolitical situation, the uncertainty of Russian oil has intensified
.
At present, the G7 has agreed to set a price cap on Russian oil and gas imports, and is studying a complex mechanism to limit the price of Russian oil, the ripple effect of which may further push up oil prices
.

The analysis predicts that the price ceiling set by Western countries for Russian oil and gas and the turbulent political situation in some oil-producing countries may trigger concerns about crude oil supply, thereby keeping oil prices high and volatile
.

JPMorgan believes that Russia has the ability to cut crude oil production by 5 million barrels
per day without unduly damaging the economy.
For much of the rest of the world, however, the outcome could be catastrophic: if U.
S.
and European sanctions prompt Russia to impose retaliatory production cuts, global oil prices could reach $
380 a barrel.

Citi expects the average price of WTI crude oil to be $95/b by 2022 and $72/b
by 2023.
Brent crude oil prices are expected to be $99/b in the third quarter of 2022, $85/b in the fourth quarter, $98/b in 2022 and $75/b
in 2023.