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On April 17, international crude oil futures fell more than 3%. The main U.S. WTI crude oil futures contract settled at $82.69 a barrel, down $2.68 or 3.2%, and the main Brent crude oil futures contract settled at $87.29 a barrel, down $2.73 or 3.0%. This was mainly due to a larger-than-expected increase in U.S. crude inventories, weaker demand expectations, and a flattening of conflict risk premiums.
EIA: U.S. crude oil inventories rose sharply by 2.7 million barrels
According to foreign news on April 17, the U.S. Energy Information Administration (EIA) released a report on Wednesday showing that U.S. crude oil inventories increased sharply last week. U.S. crude inventories rose by 2.7 million barrels in the week ended April 12, compared with analysts' expectations of a 1.4 million barrel increase, the data showed. In addition, the capacity utilization rate of U.S. refineries fell by 0.2 percentage points. At the same time, EIA data showed that US gasoline demand disappointed again, with the four-week average falling to the lowest level since the same period in 2022.
The easing of geopolitical conflict risks weighed on crude oil risk premiums
After Iran's unprecedented missile and drone attacks on Israel over the weekend, markets are watching closely to see how Israel will react, but the current signal is that Israel's fierce retaliation is unlikely and the risk of conflict is reduced. As a result, the market expects the likelihood of an escalation of U.S. sanctions on Iranian oil exports to decline. As this concern in the market eased, the supply of international oil prices dissipated, which flattened the risk premium of crude oil to a certain extent.
There is uncertainty about future oil demand expectations
The Fed's previous signals to the market have made investors generally worry that the interest rate cut cycle may not come so soon, and Fed Chairman Jerome Powell did not clarify the time for interest rate cuts on Tuesday, and the high interest rate environment in the United States may last longer, and high borrowing costs will form a strong suppression of demand. In addition, although China's economic growth in the first quarter of 2024 was faster than expected, market participants are still concerned about China's future demand performance. Especially in the context of the Sino-US trade friction, it is difficult to see signs of easing in the short term.
Forecast for the future
Xue Jinlei, a crude oil analyst at the business community, believes that the current environment for crude oil is more complex, and the performance of oil prices is also relatively anxious. Macro and demand have suppressed oil prices in the short term, and the room for oil prices to continue to rise is limited. In addition, under the premise that the current geopolitical tensions have not risen, crude oil has the expectation of smoothing the risk premium and reshaping the valuation. However, the risk has not been lifted, and gasoline demand is expected to rise due to the start of the North American driving season, which will support oil prices. Overall, the supply and demand game in the oil market will intensify in the short term, and oil prices are more likely to remain high and fluctuate.