U.S. Attitude towards Changes in Crude Oil Inventories

Last Wednesday, the crude oil inventories released by the U.S. Energy Information Association (EIA) showed that crude oil inventories dropped by 3.3 million barrels. As a result, the December WTI futures contract rose by $2.05 per barrel, or 3.45%. This is evident from the impact of changes in crude oil inventories on crude oil prices. In the past three months, due to various bad news, the price of WTI crude oil has fallen by as much as US$20 per barrel. Among various negative factors, the increasing crude oil inventory is a major negative factor.

U.S. crude oil inventories are divided into strategic crude oil inventories and commercial crude oil inventories, and the crude oil inventories generally referred to actually refer to commercial crude oil inventories. The changes in the two inventories reflect at least two aspects. One is the US government's attitude towards crude oil prices, and the other is the change in supply and demand.

Changes in strategic crude oil inventories actually reflect the US government's attitude towards oil prices. If strategic crude oil inventories increase significantly, it means that the U.S. government recognizes the current oil price and increases strategic inventories to seize crude oil resources, thereby intensifying the contradiction between supply and demand and causing oil prices to rise; if the U.S. government believes that oil prices are already high, it will not increase strategic inventories on a large scale and may even release Strategic inventories were used to stabilize oil prices, causing oil prices to fall.

In May this year, the Bush administration believed that crude oil prices were too high and announced that it would stop replenishing strategic crude oil inventories. After crude oil prices hit a new high in July, the U.S. government announced that it would use strategic crude oil inventories to stabilize oil prices if necessary. Since then, crude oil prices have begun to fall, and even at the end of July when there was a lot of bullish news, they failed to reach new highs.

There are four reasons why the U.S. government took action to stabilize crude oil prices this year: first, high oil prices have a certain slowing effect on the development of the U.S. economy; second, high oil prices have greatly increased Russia's economic strength and threatened the national strategy of the United States; third, , high oil prices are not conducive to resolving the Iran issue; fourth, the US midterm elections are approaching, and high crude oil has led to complaints from ordinary people and is not conducive to Bush's election.

With strategic crude oil unchanged, commercial crude oil inventories reflect the supply and demand relationship of crude oil. Commercial crude oil inventories have increased steadily over a long period of time, indicating that crude oil supply is greater than demand; continuous decreases in inventories indicate that supply exceeds demand; sometimes increasing and sometimes decreasing, indicating that supply and demand are basically in balance. At this time, once there is other unexpected news, it will leading to significant changes in crude oil prices. Since the beginning of this year, crude oil inventories have basically been at a relatively high level in seven years, indicating that the relationship between supply and demand is not tight, which is why OPEC wants to reduce production.

The supply of U.S. crude oil inventories comes from U.S. domestic production and crude oil imports, while demand comes from refineries refining crude oil into refined products. If the amount of domestically produced crude oil in the United States remains unchanged, the amount of weekly imports will directly affect the amount of supply. The increase in imports may indicate that the world's crude oil supply is sufficient, but it may also reflect that oil companies believe that the current price is more suitable and increase imports. Refinery operating rates reflect changes in demand for refined oil products. The EIA announced last Wednesday that U.S. domestic crude oil inventories fell by 3.3 million barrels to 332.3 million barrels in the week of October 20, with gasoline and distillates also decreasing. The reason for the decrease in inventory is the decrease in imports. The average daily import decreased by 940,000 barrels. Once imports increase, the inventory will increase.

Crude oil consumption is seasonal due to seasonal temperature changes. Winter and summer are the peak periods of oil consumption every year, and inventories tend to decrease; spring and autumn are seasons when oil consumption is relatively small. Generally, crude oil inventories are in an increasing cycle. For example, crude oil inventories are currently in an increasing cycle. , usually won’t end until mid-to-late November. The short-term decrease in crude oil inventories is also due to accidental factors, and this increasing trend generally will not change.

Finally, the indirect impact of changes in other refined oil product inventories on crude oil prices must also be considered. The investigation of refined oil products should take into account seasonal effects. For example, in winter, changes in heating oil become the focus of the market, and weather factors become the subject of speculation. If the weather is too cold, too much heating oil will be consumed, which will easily lead to a rise in both heating oil and crude oil. On the contrary, a warm winter will inhibit the rise in oil prices. In the spring and summer, especially after the peak season of summer oil consumption, gasoline becomes the focus of the market, and changes in gasoline inventories become the dominant force in the oil market. Therefore, when analyzing inventory changes, it is necessary to analyze changes in refined oil inventories and their impact.