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SunSirs: US Inventory Report Reflects Low demand, WTI Falls 4%

October 26 2020 08:07:52     SunSirs (Selena)

On October 21, the U.S. WTI crude oil futures market prices fell sharply, with the settlement price of main contracts at $40.03/ barrel, down $1.67 or 4%. Brent crude oil futures market price fell, the main contract settlement price to $41.73/ barrel, down $1.43. Oil prices fell sharply on Wednesday, mainly due to the negative US inventory data, the surge in the number of new cases of global epidemic, the slowing down of fuel demand and the expected rise in fuel demand.

On Wednesday, the U.S. Energy Information Agency (EIA) routinely released U.S. commercial crude oil inventory data. U.S. crude and distillate stocks fell last week, while gasoline inventories increased. U.S. commercial crude oil inventories fell 1 million barrels, to 488.1 million barrels in the week ending October 16, in line with previous market expectations, data showed. However, Cushing's crude oil inventory increased by 975,000 barrels and crude oil processing capacity of US refineries decreased by 551,000 barrels/ day. The decline of crude oil processing capacity in the United States indicates that the production capacity affected by the hurricane in the Gulf of Mexico has not been restored in time, and the output has decreased significantly. On the contrary, gasoline inventory increased significantly, showing an increase of 1.9 million barrels to 227 million barrels. The market had previously estimated a decrease of 1.8 million barrels. The decline in US refineries' production did not bring about the expected decline in gasoline inventories, but a substantial increase, indicating that the decline in demand was even greater. Affected by the bad news, the oil market quickly responded and fell.

While OPEC+ is still sparing no effort to reduce production capacity, the implementation rate of production reduction in September of its Member States is as high as 102%. At the same time, it will continue to implement compensatory production reduction. The oil market is affected by the epidemic, and the demand continues to decline, making the OPEC+ production reduction more thankless. Under the epidemic situation, the supply and demand of the oil market have to demand the balance point of supply and demand again. With the continuous growth of new cases, the market is firmly following the pace of demand. As of Tuesday, the world's new crown infection cases have broken through the 40 million mark, and the blockade measures have been re implemented in some parts of Europe. This casts a shadow over the prospects for a recovery in fuel demand.

SunSirs believes that in the short term, the oil market will still be suppressed by demand, and the supply side will not benefit greatly. At present, OPEC+ production reduction is still in accordance with the agreement reached before, and there is still no new policy trend at present. Moreover, the United States is in the middle of the general election, and there are great differences between the two parties in the implementation of the new fiscal stimulus policy. General Speaking, oil prices will continue to be under pressure in the near future.


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