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The latest inventory increase was far less than expected, but refined oil inventories recorded the largest increase in a month. Oil prices fell briefly after rising briefly amid confusing data; the earlier monthly report made a surprising change, and global crude oil demand growth slowed sharply. Coupled with the surge in inventories and supply, it means that the oil market will remain oversupplied until at least the first half of the year, which has severely dampened the confidence of bulls. Investors are focused on tonight's report to determine whether last week's sharp drop in crude oil inventories was a one-time event.
U.S. crude oil monthly futures closed down .USD, or .%, at .USD/barrel; Brent crude oil monthly futures closed down .USD, or .%, at .USD/barrel. Following the Organization of the Petroleum Exporting Countries (OPEC), the International Energy Agency (IEA) also released a pessimistic monthly report. Investors' expectations for the production freeze talks at the end of this month have been greatly reduced, and the rebound of the US dollar has also put pressure on oil prices. Although U.S. crude oil inventory data released this morning was better than expected, oil prices returned to decline after a brief rise.
On Tuesday, the U.S. dollar index fluctuated higher, currently trading at ., or .%, after falling sharply overnight as comments by Federal Reserve Governor Brainard reinforced the view that the Federal Reserve is unlikely to raise interest rates this month. However, the market quickly digested Brainard's dovish remarks, and the U.S. dollar index rebounded from overnight losses. A stronger U.S. dollar put pressure on oil prices.
OPEC members will hold talks at the end of this month. The production freeze meeting is getting closer and closer. The market continues to discuss the topic of production freeze. However, the author has already said before that the political relationship between Saudi Arabia and Iran has changed. It is destined that there will be no substantial progress in this production freeze, let alone Iraq, which is halfway through. After Iraq's new oil minister took office, he "fully increased production without worrying about the oil production target". This political strategy also shows Iraq's attitude towards the production freeze. Not that friendly.
On the other hand, it is worth considering Saudi Arabia’s attitude towards shale oil. The author predicts that if a consensus on a production freeze is really reached, Saudi Arabia’s archenemy shale oil will definitely bear the brunt of the growth. No matter how much production is frozen, the results will be negligible. Meaning, then Saudi Arabia will lose more than it gains.
Putting aside the factor of production freeze, Jianbai believes that it is worth paying attention to the trends in Venezuela. You must know that this small country has the richest crude oil reserves, but due to the sluggish economy, this country is basically in a state of collapse. According to the author’s understanding At present, the country has fallen into a vicious cycle of stagnant production, no income, and inability to import raw materials to maintain production. There is still a long way to go before the production freeze can succeed.
U.S. crude oil market analysis
Recently, U.S. crude oil has often risen and fallen sharply, which shows that the forces of the long and short sides are relatively balanced on this line, and any event will lead to significant fluctuations. This in turn shows that US crude oil has been volatile recently! Yesterday's monthly report showed that the oversupply of crude oil will continue, and supply balance will not be possible until some time this year. However, this has become the market consensus, and oil prices have not reflected it.
From a technical perspective, oil prices retreated from highs yesterday, plunging more than US$1.00, and plummeted by around .% due to the monthly report. The Bollinger Bands are closing slightly, with the top line suppressed by the daily mid-track and running below the mid-track. The energy is not displayed, and the fast and slow lines are glued and run on the zero axis. A preliminary dead cross is formed, and there is a trend of further downward divergence.
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