According to official data from the United States, both crude oil and gasoline inventories in the United States fell last week, reflecting a rebound in demand before the Labor Day holiday in early September. Surveys show that the number of observers who expect OPEC+ to increase production as planned in October is almost equal to the number of those who expect it not to. The shutdown of production in Libya this week is said to have resulted in a decrease of more than half of the country's output, and if the shutdown continues for a long time, it may pave the way for increased production in other OPEC+ countries.
Recent data shows that there are signs of stronger oil demand in the US market last week, while surveys indicate a disagreement among observers on whether OPEC+ will start to resume oil production in the third quarter according to the plan.
On Wednesday, August 28th, US Eastern Time, the US Department of Energy's Energy Information Administration (EIA) released the weekly oil inventory report, showing that last week's crude oil and gasoline inventories both declined, reflecting the demand recovery before the Labor Day long weekend and the end of the summer driving season. The EIA report shows:
As of the week ending on August 23, that is, last week, the US EIA crude oil inventories decreased by 0.846 million barrels to 0.4252 billion barrels compared to the previous week, a decrease that was less than the analysts' expected 2.52 million barrels, marking a two-week decline and reaching the lowest total inventory since January. Crude oil inventories in the Cushing region declined by 0.668 million barrels compared to the previous week, reaching a low not seen since November last year.
Last week, EIA gasoline inventories decreased by 2.2 million barrels to 0.2184 billion barrels, hitting a new low since November last year, with a decline exceeding the expected 2.15 million barrels. The gasoline inventories in the Gulf of Mexico decreased by 2.8 million barrels to 76.3 million barrels, hitting a new low since March 2021. Last week, the EIA refined oil inventories increased by 0.275 million barrels, contrary to the expected decrease of 0.815 million barrels.
The EIA report also shows that last week, the US refinery crude oil processing volume increased by 0.175 million barrels, and the utilization rate of the equipment rose by 1 percentage point to 93.3%, a sharp increase compared to the expected 0.1 percentage point. Processing volumes rebounded in all regions last week, with the equipment utilization rate in the Rocky Mountain region exceeding 100% of capacity, the highest in five years, leading to the lowest crude oil inventories in the region since 2020.
Comments pointed out that although the EIA data for a single week may be highly unstable and fluctuate greatly, the data shows some signs of a slight recovery in implied gasoline demand. Calculated on a one-week basis, last week's oil product supply in the US reached a new high since November last year. However, calculated on a four-week basis, based on seasonal refined oil demand, it reached the lowest level since 2010. This will keep the oil bulls under pressure, especially as investors continue to focus on the prospects of the world's two major economies.
After the EIA data was released, the intraday decline in international crude oil prices narrowed on Wednesday, with the US WTI crude oil, which had fallen by over 2% in European stock trading, briefly rising above $75.00 in early US trading, while Brent crude oil, which had also fallen by nearly 2% in European stock trading, briefly approached a flat rate intraday.
Also on Wednesday, a survey of traders, refiners, and analysts carried out by the media revealed that among these observers, 12 people expected that OPEC+ countries such as Saudi Arabia and Russia would gradually withdraw their voluntary production cuts starting in October as planned, with an increase of 0.543 million barrels per day in October, according to the plan. 11 people expected a delay in production increases, while 5 people expected a partial increase or it would depend on the situation of the continuing shutdown in Libya.
On Monday of this week, the government in northeastern Libya ordered a halt to all local crude oil production and exports. On Wednesday, the media reported that since the halt in production, Libya's oil output has decreased by more than half this week, from 1 million barrels per day before Monday to about 0.45 million barrels per day. The majority of Libya's oil production is concentrated in the eastern region, and the situation in the country could result in a global supply shortage of nearly 1 million barrels per day.
OPEC+ has repeatedly emphasized that it can suspend production increase plans or reverse actions and continue to cut production if necessary. On Wednesday, the media mentioned that several representatives of OPEC+ said that they currently expect OPEC+ to proceed with production increases, but at least one representative believes that the implementation of the plan needs to be postponed.
Commentators have stated that international oil prices have fallen by over 10% since early July, despite the fact that political issues within Libya have already led to a reduction in the country's production by 0.4 million barrels per day, a decrease of about 40%, which is part of the OPEC+ agreement. The survey shows that market observers are still uncertain about whether OPEC+ will implement the production increase plan, just like one month ago.
Because oil prices are already too low for major OPEC+ countries like Saudi Arabia to offset their governments' expenditures, analysts from Citigroup, Rystad Energy, DNB ASA, and BNP Paribas doubt that OPEC+ will increase supply as planned. However, if Libya's shutdown continues in the long term, it may pave the way for other OPEC+ countries to begin increasing production. Ole Hansen, Head of Commodity Strategy at Denmark's Saxo Bank, believes that Libya's chaos could facilitate an increase in production without causing significant impact on prices and market sentiment.
Editor/ping