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Vladimir Zernov
Crude Oil

Oil Video 23.09.20.


Crude Inventories Decline By 1.6 Million Barrels

EIA has just released its Weekly Petroleum Status Report which indicated that crude inventories decreased by 1.6 million barrels. Yesterday’s API Crude Oil Stock Change report showed an inventory increase of 0.7 million barrels.

According to EIA, gasoline inventories decreased by 4 million barrels while distillate fuel inventories decreased by 3.4 million barrels. The decline in gasoline inventories is the main factor that is providing support to the oil market right now.

U.S. domestic oil production decreased from 10.9 million barrels per day (bpd) to 10.7 million bpd as the hurricane season continued to put pressure on oil producers in the U.S. Gulf of Mexico.

However, this factor will soon lose its relevance, and U.S. domestic oil production will likely get back above the 11 million bpd level.

So far, oil managed to avoid another sell-off despite the strength of the U.S. dollar and fears about the second wave of coronavirus in Europe. However, oil traders will likely need to see a continued decrease in inventories to keep buying oil at current levels as virus-related demand risks are significant.

Russia’s Gazprom Neft Believes That Oil Demand Will Recover By The End Of 2021

In recent weeks, Russian energy officials and oil companies have been very active in providing verbal support to the oil market.

This time, the CEO of Russia’s oil company Gazprom Neft stated the global oil demand would get back to pre-pandemic levels by the end of 2021. He also noted that he believed that the second wave of lockdowns would be avoided.

Judging by the recent price action in the oil market, oil traders share this view. The current consensus is that most countries could not afford a second lockdown so they would not follow Israel’s example (Israel has recently entered into a three-week lockdown).

I’d note that the unusual amount of verbal support from the Russian side may be a sign of nervousness ahead of the flu season in the Western Hemisphere. At this point, it is hard to predict whether the world will get hit by a second wave of lockdowns or not, so oil traders will likely watch virus data on a daily basis to get a feel of where the situation is heading.

For a look at all of today’s economic events, check out our economic calendar.

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