Crude oil trading reminder: under the concern of the global economic slowdown, oil demand growth is at risk, and the decline will continue after breaking the 90 mark?

At the beginning of the Asian session on September 1 (Thursday), U.S. oil is now at $89.99 / barrel; Oil prices extended their decline on Wednesday, falling nearly 4 percent below the 90 mark amid fears that the global economy will slow further, OPEC+ sees oil demand growth at risk and fears that demand across the West will be undermined; Meanwhile, G7 finance ministers will meet on Friday to discuss the Biden administration's proposed price cap on Russian oil.

Intraday focus is on the FINAL markit manufacturing PMI in the United States in August and the ISM manufacturing PMI in the United States in August.

Negative factors affecting oil prices

White House says G7 will discuss capped Russian oil prices on Friday.

The White House said the Finance Ministers of the Group of Seven (G7) would meet on Friday to discuss the Biden administration's proposed price cap on Russian oil.

White House spokesman Jean Pierre told reporters at Wednesday's briefing that "we believe this is the most effective way to crack down on Putin's revenues, which will not only lead to a decline in Putin's oil revenues, but also push global energy prices back," which will be discussed further at this week's G7 finance ministers' meeting. ”

G7 leaders are discussing how to set such a price cap and are considering other alternatives, including blocking the shipment of Russian oil.

The International Energy Agency (IEA) said last month that while Russian oil exports fell to their lowest level since august last year, its Export Earnings in June increased by $700 million from the previous month and 40 percent higher than last year's average due to rising prices.

Western leaders have suggested addressing the issue by setting price caps that limit the prices that refiners and traders pay for Russian crude. Moscow said it would not be bound by the situation and said it could ship oil to countries that do not impose price caps.

【U.S. private job growth slows in August】

According to the ADP National Jobs Report, private jobs in the U.S. grew only modestly in August, but this may have overstated the extent of the labor market slowdown, as government data continues to point to strong demand for workers and remains tight labor market conditions. After adding 268,000 jobs in July, the ADP report showed an increase of 132,000 private jobs in August. The ADP suspended its report in June and July due to changes to its data methodology, and economists are skeptical that the new ADP report will become a reliable indicator of the labor market.

【OPEC+ believes oil demand growth is at risk】

The Organization of the Petroleum Exporting Countries (OPEC) oil production rose to its highest level since the beginning of the 2020 pandemic in August, thanks to libya's facilities recovering from turmoil and Gulf member states ramping up production and gradually reducing the cuts previously agreed with allies, Reuters surveys showed. According to a Reuters survey, OPEC oil production was 29.58 million b/d in August, the highest level since April 2020 and an increase of 690,000 b/d from July.

OPEC+ sources said that due to insufficient production in its member countries, the oil market will have only a small surplus of 400,000 barrels per day in 2022, far below the previous forecast. Sources told Reuters that discussions about production policies after September and whether oil-producing groups would cut production have not yet begun.

A report by the OPEC+ Joint Technical Committee (JTC) seen by Reuters shows that the committee believes that the excess volume in the oil market this year will reach 900,000 bpd, an increase of 100,000 b/d from the previous forecast. Under its underlying scenario, JTC sees a surplus of 3.1 million b/d in the oil market in September, a drop to 600,000 b/d in October, and then rising to 1.4 million b/d in November.

【U.S. stocks hit the weakest August performance in seven years】

U.S. stocks closed lower for the fourth straight day on Wednesday and recorded their weakest August performance in seven years, with concerns about aggressive Fed rate hikes persisting. The decline in technology stocks, particularly chip stocks, put the market under further pressure after Seagate and HP both issued weak financial forecasts.

The three major stock indexes recorded their biggest August percentage declines since 2015. The S&P 500 has fallen in recent weeks after hitting a four-month high in mid-August, and by Wednesday's close, the monthly line had fallen more than 8 percent and broken through several closely watched technical support levels.

In a hawkish speech on Friday, Fed Chairman Jerome Powell said monetary policy would be tightened "for some time" before selling pressure accelerated, with stock indexes falling more than 5 percent over the past four trading days. Ingalls&；； Tim Ghriskey, senior portfolio strategist at Snyder, said: "[Powell] is concerned about getting inflation back down and will raise interest rates for that, and as for how aggressive it is going to be, it will all depend on the data. Now that the market is repeatedly tug-of-war and very volatile, people are worried that this rally is just a rebound in a bear market, and some people may worry about hitting a new low.

Cleveland Fed Bank President Loretta Mester said Wednesday that the Fed would need to raise interest rates above 4 percent by early next year and then keep it there in order to get excessively high inflation back to target. This month, the Dow fell 4.06 percent, the S&P 500 fell 4.24 percent, and the Nasdaq fell 4.64 percent. Adding to investor tensions, the stock market will enter the traditional period of weakness in September.

Sam Stovall, chief investment strategist at CFRA in New York, said: "September is usually the worst month of the year; Only September and February were the months in which average declines were recorded, but September was the only month of the year where it fell more than it rose, so it could end up being some sort of self-fulfilling prophecy. ”

Data earlier in the day showed ADP private jobs increased by 132,000 in August, down from the 288,000 predicted by economists surveyed by Reuters. ADP suspended its reporting in June and July due to changes to its data methodology after the company had been poorly documented in forecasting private jobs in the Labor Department's Bureau of Labor Statistics' employment report.

Labor Department's employment data, which will be released on Friday, is expected to show a 300,000 increase in non-farm payrolls last month after recording a 528,000 increase in July. If the report remains strong, it could further solidify expectations that the Fed will continue to raise rates at a large margin after three consecutive 75 basis point rate hikes.

Pneumonia of unknown cause in northern Argentina has resulted in 2 deaths

On August 31, local time, the Argentine Ministry of Health reported that a hospital in the northern province of Turkmen in the country has a new case of pneumonia of unknown cause death, at present, the disease has caused 6 people infected, of which 2 died, and 4 other severely infected people, one of whom has signs of recovery.

The Afghan Ministry of Health said that in mid-August, a case of pneumonia of unknown cause was found in a hospital in the province, and there was inflammation in the lungs of both infected people, and the Afghan Ministry of Health was investigating its cause and transmission path, and it was uncertain whether it was a virus or a bacterium that caused the onset, and said that valuable results had not yet been achieved. The hospital has now been shut down and has stopped accepting new patients.

Bullish factors affecting oil prices

U.S. crude inventories down 3.3 million barrels

The U.S. Energy Information Administration (EIA) said Wednesday that crude inventories have fallen in the most recent week, while distillate inventories have risen slightly and demand has rebounded.

Oil prices fell on concerns about demand, but U.S. demand data improved slightly, alleviating some of the concerns. Refinery activity has declined as maintenance season approaches, but refineries still face the challenge of replenishing distillate inventories ahead of the onset of winter.

Crude inventories fell 3.3 million barrels to 418.3 million barrels in the week ended Aug. 26, a greater drop than the 1.5 million barrels forecast in the Reuters survey. Distillate inventories, including diesel and heating oil, increased by 111,000 barrels to 111.7 million barrels, compared with an expected decrease of 960,000 barrels. At this time a year ago, distillate inventories were 136.7 million barrels. The biggest drop was on the East Coast, which is the region with the most heating oil use in the country.

Robert Yewger, head of energy futures at Mizuho Bank, said: "Distillate inventories have stopped a further downward trend and started to increase, which is exactly what the current market environment requires. But the increase is small, and as we move into September, inventories will need to increase significantly. ”

U.S. gasoline product supply has increased in the most recent week, but total product supply has reached 20.1 million b/d over the past four weeks, down 6.4 percent year-on-year.

Phil Flynn, an analyst at PriceFuturesGroup in Chicago, said: "We've seen gasoline demand pick up from the previous week, but still not as much as we'd like to see, with mixed sentiment on the demand side, but total supply back above 20 million bpd/d is very supportive." ”

Refinery capacity utilization fell by 1.1 percentage points to 92.7 percent, which should fall further ahead of the maintenance season.

[The EU will propose the 8th round of sanctions against Russia]

Since the outbreak of the Russian-Ukrainian conflict, the EU has imposed seven rounds of sanctions on Russia. On August 31, local time, German Federal Foreign Minister Berberk said that the European Union is negotiating on the 8th round of sanctions, and Russian oil exports may become the focus of sanctions. Berbock revealed at the EU Foreign Ministers' Meeting in Prague on the same day that the German government is working hard to promote the implementation of the 8th round of sanctions against Russia and has made suggestions to the EU in this regard. While Belbock did not disclose the specifics of the sanctions, she stressed that it was important to be able to maintain sanctions against Russia in the long term.

[The United States needs to make "stronger assurances" in the negotiations on the resumption of implementation of the JCPOA]

Iranian Foreign Minister Abdullahyan said on Aug. 31 that Iran needs "stronger and more reliable assurances" from the United States in the negotiations to resume implementation of the JCPOA. According to Iran's Mehr News Agency, Abdulrahyan made the above remarks when he met with Russian Foreign Minister Lavrov during his visit to Russia. Abdulrahyan said that the Iranian side is reviewing the latest text proposed by the US side on resuming the implementation of the Iranian nuclear agreement, "On the issue of relevant assurances, we still need a stronger text." ”

Overall, although EIA data shows that U.S. crude oil inventories have declined, but under the concern of further slowdown in the global economy, especially under the Fed's firm pace of interest rate hikes, the market is worried that demand in western countries will be destroyed, coupled with OPEC oil production rose to the highest level since the beginning of the epidemic in August, OPEC+ believes that oil demand growth is at risk, which reinforces demand concerns, and oil prices maintain a short-term tone.

This article originated from Huitong Network