EIA crude oil inventories rose sharply more than expected, and U.S. oil fell slightly by $0.4 in the short term

On Wednesday (August 3) in the New York session, at 22:30 Beijing time, data released by the US EIA showed that in the week ending July 29, the US commercial crude oil inventories in addition to strategic reserves increased more than expected, refined oil inventories fell more than expected, and gasoline inventories increased
slightly.
U.
S.
crude oil prices edged back $0.
4 in the short term after the EIA data
.

Specific data show that the actual increase in EIA crude oil inventories in the United States for the week ended July 29 was 4.
467 million barrels, an expected decrease of 629,000 barrels, and a decrease of 4.
523 million barrels
in the previous value.

In addition, the actual increase in EIA gasoline inventories in the United States for the week ended July 29 was 163,000 barrels, compared with an expected decrease of 1.
614 million barrels and a decrease of 3.
304 million barrels in the previous week; the actual decrease in EIA refined oil inventories in the United States for the week ended July 29 was 2.
4 million barrels, an expected increase of 1.
038 million barrels, and a decrease of 784,000 barrels
in the previous week.

The EIA report showed that U.
S.
domestic crude oil production remained at 12.
1 million b/d
last week.
U.
S.
crude exports fell 1.
036 million b/d to 3.
512 million b/d
last week.
The four-week average supply of U.
S.
crude oil products was 19.
917 million b/d, down 3.
05%
from the same period last year.
U.
S.
Strategic Petroleum Reserve (SPR) inventories fell by 4.
69 million barrels, or 0.
99
percent, to 469.
9 million barrels last week.

Commercial crude excluding strategic reserves imported 7.
342 million b/d last week, up 1.
178 million b/d
from the previous week, EIA reported.
Commercial crude inventories, excluding strategic reserves, rose 4.
467 million barrels, or 1.
06 percent
, to 427 million barrels.

According to the EIA report, U.
S.
commercial crude imports excluding strategic reserves in the week ended July 29 were the highest since the
week of July 3, 2020.
U.
S.
EIA refined oil inventories fell by the most
since the week of April 15, 2022, in the week to July 29.
U.
S.
EIA Strategic Petroleum Reserve inventories for the week ending July 29 were the lowest
since the week of May 17, 1985.

Analyst Chunzi Xu analyzed that gasoline demand fell by 7.
61% compared with last week, almost reversing all gains in the previous week, resulting in a 2.
5%
decline in the four-week rolling average.
The decline suggests that demand remains subdued
despite the continued decline in gasoline retail prices.

Markets are closely watching this week's OPEC+ meeting

Against the backdrop of escalating supply concerns, the market's focus has shifted to the upcoming OPEC+ ministerial meeting
this week.
At the meeting, OPEC and its allies will come together to decide on oil production policy in September, and the August 3 meeting will determine whether it will heed the U.
S.
call to supply more crude
to global markets.

According to foreign media reports, Russian Deputy Prime Minister Alexander Novak and Saudi Energy Minister Abdulaziz bin Salman met in Riyadh on Friday local time and reiterated their commitment
to the OPEC+ agreement and the stability of the oil market.
It is reported that this is the first direct meeting
between the heads of the energy departments of the two countries since June.

For the international crude oil market, the upcoming OPEC+ meeting this week will reveal the "doubt"
of increasing production.
With OPEC+ deciding to continue to raise its average production capacity by 648,000 barrels per day in August this year, it means that the new crown epidemic-induced production cuts have fully resumed
.
Whether to apply the production restriction mechanism and production targets in September and beyond became the focus of
the meeting.

Some analysts pointed out that in fact, the current market expectations for OPEC+ production increase are quite different, some people believe that there may be a small increase in production, some people believe that it may not increase production, and the consensus is that the overall supply increase of OPEC+ countries is limited
.
Unless OPEC+ makes decisions that exceed market expectations, it will not provide a new impetus
for oil prices.

It is understood that OPEC countries currently have different
attitudes on increasing production.
The analysis said that specifically, Saudi Arabia's attitude towards increasing production is more ambiguous, but it only stated that all production problems will be solved
within the OPEC framework.
The United Arab Emirates, Iraq and Kuwait have recently revealed their willingness to
increase production.
In addition, August this year was the first time that OPEC's new Kuwaiti secretary-general took office, and the previous secretary-general, Barkin, promoted six consecutive years of production cuts, and the attitude of the new secretary-general is also crucial
.

Geopolitical tensions continue to support oil prices

The military conflict between Ukraine and Russia continues, Western countries led by the United States have imposed a series of sanctions on Russia, and Russia has further reduced natural gas supplies to Europe, lingering concerns about tightening supply, providing strong support
for oil prices.
Data released by German gas pipeline operator Gascade reported that the Nord Stream-1 pipeline has dropped to 20%
of its maximum capacity due to the shutdown of another turbine.

Gazprom said the documents provided by Germany did not mention repairs to other turbines; Siemens did not fully comply with its service obligations and did not clearly state the maintenance and repair of turbines; To this day, no documents have been seen on the transport of turbines; Siemens did not repair all the failures of the turbines, and we expected Siemens to send maintenance experts to the Portovaya compression station; the European partner has not fulfilled its contractual obligations to provide services to Nord Stream 1; Once the problem is resolved, gas supplies
through Nord Stream 1 will be restored.

The failure of the Nord Stream 1 facility in Russia could further affect gas supplies or provide some support
for oil prices.
The Kremlin issued a statement on Monday saying Russia had little ability to change the status quo
with Nord Stream-1 equipment.
Last week, Russia cut Nord Stream-1 gas supplies to 20%
of its capacity due to escalating energy tensions caused by the war in Ukraine.
The European Union (EU) has accused Russia of energy blackmail, but the Kremlin argues that Gazprom's business disruption was caused by
maintenance issues.
According to a spokesman for Nord Stream 1, Russia's largest gas pipeline to Europe, one of the company's gas turbines had not arrived on Tuesday after repairs in Canada, while the second turbine was defective
.

Global central bank expectations of sharp interest rate hikes cooled, giving oil prices support

The recession and the global pandemic have limited expectations of central banks around the world from
raising interest rates.

This led to stronger U.
S.
stocks and a weaker U.
S
.
dollar, supporting oil prices.
A weaker dollar has made dollar-denominated crude cheaper for buyers holding other non-U.
S.
currencies
.
U.
S.
stocks extended recent gains on Friday, with the S&P 500 and Nasdaq posting their biggest monthly percentage gains since 2020 as Apple and Amazon released optimistic earnings expectations
.
John Kilduff, a partner at Again Capital LLC, said that these days, the oil market has been affected by a lot of macro factors, the stock market has rebounded well, and the dollar has fallen sharply, which has affected oil prices
.

Weaker-than-expected U.
S.
economic data painted a bleak outlook for the economy and heightened recession fears
.
U.
S.
GDP contracted for two consecutive quarters in the second quarter, the Federal Reserve's Chicago National Activity Index contracted for the second month in a row, and the Dallas Fed manufacturing index also fell sharply, indicating that the state of the US economy was worse
than expected.
Meanwhile, China's official manufacturing PMI for the world's second-largest economy fell back into contraction territory at 49.
0 vs.
50.
4 expected vs.
50.
2 previously, while the non-manufacturing PMI fell to 53.
8 versus 52.
3
expected from 54.
7.

The rapid spread of the global pandemic has limited the rebound
in oil prices.
Japan's new coronavirus cases exceeded 30,000 per day, while monkeypox cases in the United States soared, becoming the country with the largest known monkeypox cases in the world, as of Friday, a total of 5,189 confirmed monkeypox cases were reported in the United States, while India had its first monkeypox death
.
Local governments may introduce restrictions to contain the epidemic, which will inevitably affect people's travel and weaken the demand for
crude oil.

In addition, many places in the United States have declared a public health emergency due to the monkeypox epidemic, which may also affect crude oil demand
.
U.
S.
Governor Pritzker of Illinois declared a public
health emergency in the state on Monday due to the monkeypox outbreak.
Pritzker also said monkeypox is a rare but potentially serious disease that requires full mobilization of all available public health resources to respond to the current outbreak
.
According to the US Centers for Disease Control and Prevention, there are currently more than 5,000 confirmed cases of monkeypox in the United States and 520 in Illinois, second only to New York and California
.

Global supply concerns have eased, which is not conducive to oil prices

On the supply side, the increase in production and exports of major oil-producing countries has eased the supply-demand imbalance
.
Saudi crude oil exports surged to their highest level
since April 2020 in July under pressure from the international community to curb rising oil prices.
Saudi maritime traffic reached about 7.
5 million b/d last month, compared with 6.
6 million b/d
revised in June, according to tanker tracking data collected by agencies.
Russia's crude oil production rose to 9.
78 million b/d
in June from 9.
27 million b/d in May as a secondary source at OPEC+.
Russia's June output was 885,000 b/d below the OPEC+ quota, an improvement
from the 1.
28 million b/d gap in May, the report showed.
In addition, Kazakhstan's oil production in July rose 15% from June to 1.
38 million b/d, below the OPEC+ quota
, according to agency statistics.

Iran is working with relevant parties to the Iranian nuclear agreement to provide the United States with an "opportunity to show goodwill" and raise hopes for the Iranian nuclear agreement, thereby laying the foundation for
Iranian crude oil to enter the market.
If a deal is reached, the United States will lift sanctions on Iran, which will supply the oil market with more than 1 million barrels per day
.
Iran's deputy foreign minister and chief negotiator on the Iranian nuclear issue Bagheri said on social media that Iran is working closely with relevant parties to the Iran nuclear agreement, especially the EU coordinator, in order to "provide the United States with another opportunity to demonstrate its goodwill and responsibility.
"
If the other side (the United States) is ready, Iran is also ready to conclude negotiations
in a short time.
Bagheri stressed that Iran has submitted some contents and ideas to relevant parties in order to pave the way for a quick solution, and stressed that the United States should correct the complex and destructive situation
caused by its unilateral withdrawal from the Iranian nuclear agreement.

Fears of a U.
S.
recession limit oil prices

Last month's Fed rate hike of 75 basis points was in line with expectations, and U.
S.
GDP data was released, adding to fears that
a recession could hit energy demand.
However, the reality is that inflation may still remain high for a "long time", and the pace of interest rate hikes is expected to slow down, bringing about a repair
in market sentiment.

From the perspective of the Fed's rate hike path, the rate hike will bring a recession and a slowdown
in demand.
However, from the historical review, it can be seen that there is no clear path dependence between interest rate hikes and oil prices, no obvious negative correlation, and lagging behind
.
From the perspective of theoretical transmission logic, the Fed's interest rate hike has led to a strengthening of the US dollar, which has led to a decline
in the price of dollar-denominated commodities.
However, the current game in the crude oil market is still continuing, among which the uncertainty of the supply side caused by the Russia-Ukraine conflict and sanctions against Russia will still lead to prominent structural contradictions in the supply of the energy market, and energy prices have been at a high level
for a long time.

Soaring inflation and fears of a recession triggered by rising interest rates remain obstacles to the upward movement of oil prices, as a recession will affect people's incomes and weaken fuel demand
.
ANZ analysts said fuel sales to Western self-driving trips were weakening and gasoline demand remained below the five-year average
for the same period.
The Reuters poll also illustrates this point, with analysts surveyed forecasting Brent crude to average $105.
75 a barrel in 2022, down from $106.
82 forecast in June, the first monthly
oil price forecast since April.
The average price forecast for U.
S.
crude oil was lowered to $
101.
28 a barrel.
At the same time, JPMorgan expects Brent crude to be a low of $100/b in the second half of 2022 and a high of $90/b
in 2023.
The bank's oil strategists point out that the risk of recession has not yet been reflected in the oil market, and the risk of recession is increasing
.

Weak manufacturing PMI data from major countries has raised fears of a global recession and clouded
the outlook for crude oil demand.
China, the world's second-largest economy, released official manufacturing PMI over the weekend fell back into contraction territory at 49.
0 vs 50.
4 expected and 50.
2 previously, while the non-manufacturing PMI fell to 53.
8 versus 52.
3 expected from 54.
7
previously.
Meanwhile, U.
S.
manufacturing activity showed signs of slowing in July, painting a bleak outlook for the economy and heightening recession fears
.
The ISM survey's forward-looking new orders sub-index fell to 48.
0 in July from 49.
2 in June, the second consecutive month of contraction
.
This, combined with a steady reduction in backlog orders, suggests a further slowdown
in manufacturing in the coming months.