The Commodities Feed: US crude oil inventory increases sharply
On June 15th, 2023, the latest changes were made to this blog just three days ago.
The oil market had conflicting information yesterday. The IEA report was pretty balanced, with the expected growth in both supply and demand increasing slightly by 0.2MMbbls/d. However, the weekly report from the EIA wasn't very positive as there was a substantial 7.9MMbbls increase in US crude oil inventory for the week.
Yesterday, the International Energy Agency (IEA) released their recent monthly update on the oil market. The IEA also presented their estimates for future oil demand and supply. According to the agency, they have increased their prediction for oil demand growth by 0.2MMbbls/d for the year 2023, with an expected global demand increase of 2.4MMbbls/d, bringing the total to 102.3MMbbls/d. However, the IEA predicts that demand growth will slow down to 0.9MMbbls/d in 2024 due to the shift towards cleaner energy and a stabilization of overall energy demand. As for the supply side, the IEA raised their estimate for global oil supply by about 0.2MMbbls/d for 2023. The international oil supply is predicted to increase by 1.4MMbbls/d to 101.3MMbbls/d for 2023, mostly contributed to by non-OPEC countries such as the US and Latin America. In 2024, the IEA anticipates that global oil supply growth will slow down to 1MMbbls/d.
In the coming years, the International Energy Agency predicts that the world's need for oil will decrease significantly due to the rise of electric cars and a lower demand for gasoline and distillates. By 2027/28, the only growth in demand for oil will likely come from LPG, ethane, and naphtha products where substitution is not practical. Meanwhile, the use of gasoline and diesel fuel is expected to drop. Despite this trend, the IEA believes that major oil-producing countries will continue to expand their output to ensure that there is enough supply for the market in the years to come.
According to the most recent report from the Energy Information Administration (EIA), commercial crude oil inventories in the United States rose significantly, by 7.9 million barrels to reach a total of 467.1 million barrels. This result was contrary to market predictions of a 1.11 million barrel decrease, and conflicting with the API's report of a 1 million barrel increase. When taking into account the Strategic Petroleum Reserve (SPR) stocks, total crude oil inventories increased by around 6 million barrels, as SPR stocks fell by 1.9 million barrels for the second consecutive week. Additionally, oil inventories in Cushing, Oklahoma, rose by 1.6 million barrels, reaching their highest level since 2021. US crude oil production remained at 12.4 million barrels per day during the same period. Turning to refined products, gasoline inventories rose by 2.1 million barrels, surpassing expectations for a 1 million barrel increase. Meanwhile, distillate stockpiles increased by 2.1 million barrels, in line with expectations for a 2 million barrel increase.
According to the latest information from the National Bureau of Statistics (NBS), China's monthly production of crude steel decreased by 7.3% compared to the previous year and 2.7% compared to the previous month in May 2023. This is the second consecutive month where domestic steel producers are slowing down output due to falling margins. The total amount produced in the first five months of the year saw a slight increase of 1.6% YoY to 444.6mt; however, this growth was affected by the lower production numbers in April and May. Chinese primary aluminium production, on the other hand, saw a 1.1% increase YoY, reaching 3.42mt in May 2023. The cumulative output of aluminium increased by almost 3.4% YoY, totaling 16.7mt in the first five months of the year. We might see an increase in primary aluminium production in the coming months due to Yunnan's plan to bring back around 1mt of capacity from the end of next month.
On the other hand, the value of gold kept declining for the fifth day in a row, and this morning it was slightly lower, after the Federal Reserve hinted at the possibility of increasing interest rates because inflation risks remain high. During its most recent gathering, the Federal Reserve decided to maintain interest rates at 5-5.25%.
When observing the holdings of ETFs, gold ETFs saw a decrease of 12.9 thousand ounces yesterday. This marks the 12th consecutive decrease in holding. As of yesterday, the total known holding of gold ETFs was 93.8 million ounces, which is the lowest it has been since May 8th.
This week, the difference in price between low-quality Robusta coffee and higher-quality Arabica coffee fell to a low of US¢59.7/lb, the lowest it has been since December 2020. This is due to the two types of coffee having different supply and demand factors. Robusta coffee, which is produced in places like Vietnam, Indonesia, and India, is in higher demand and its stock is decreasing. Additionally, there are fears of poor weather conditions affecting crops in countries like those located near the Pacific, which has also contributed to the rise in Robusta prices. The United States Department of Agriculture (USDA) has predicted a 5% decrease in Brazil's Robusta coffee production to 21.7m bags due to unfavorable weather conditions. Meanwhile, Arabica coffee prices have been affected by the anticipation of a substantial crop from Brazil and weaker global demand. As the harvest season in Brazil commences after a two-year period of low production caused by bad weather, there is renewed downward pressure on Arabica prices.
This text, which was created by ING, is only intended for informational purposes and does not take into account the individual user's financial position, goals, or resources. The information provided should not be interpreted as investment advice, nor is it legal or tax advice. Furthermore, it does not contain an invitation or solicitation to buy or sell any financial product. For more information, please refer to the original text.
