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Reflections of Central Bank behavior on global oil demand
The global dynamics of the oil market is a constant and unpredictable dance of supply and demand. Recently, surprising expectations, crude oil inventories in the United States increased by 7,9 million barrels in the last week. In contrast, a Reuters poll projected a reduction of 510 barrels, showing a discrepancy of more than 8 million barrels. The refineries, meanwhile, are running at full steam, at 93,7% of their capacity, producing 10,2 million bpd of gasoline and 5 million bpd of distillate.
The Game of Central Banks and Reflections on the Oil Market
Although the US Central Bank kept interest rates unchanged at the last meeting, a more aggressive stance (hawkish) by the monetary authorities surprised the market, signaling possible interest rate increases later this year, if necessary. This outlook resulted in a reaction in oil benchmarks, with Brent closing at $73,20 (-1,47%) and a barrel of US WTI crude at $68,27 (-1,66%).
However, the maintenance of the interest rate in the US helped to balance the game, causing gains of 2,55% and 2,29% at the end of last week, respectively.
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At the same time, on the political level, the Biden government expressed its intention to buy back at least 12 million barrels of oil for the Strategic Petroleum Reserve (SPR) in 2023. A measure in response to the sale of more than 200 million barrels carried out in the year earlier, after Russia's invasion of Ukraine, with the aim of stabilizing oil markets and dealing with high prices at the pumps.
The European and Asian Scenario: Divergent Policies and Direct Impacts
Europe, on the other hand, takes a different route. The European Central Bank raised interest rates by a quarter of a point, reaching the highest level in 22 years, and signaled that a new hike in July was very likely. As a result, the euro gained strength against the dollar, causing EU 2-year bond yields to skyrocket. In a chain of events, a weaker dollar makes oil cheaper for holders of other currencies.
In Asia, the Central Bank of China surprised by cutting the short-term lending rate for the first time in months. An attempt by the monetary authorities to restore market confidence and boost the local economy. This maneuver, in a weakened real estate and construction sector, makes a recovery in diesel demand more challenging, while the economic situation puts pressure on travel-related demand for gasoline and kerosene.
For the future, new countercyclical adjustments are expected, as the Chinese government seems committed to providing stimuli and sustaining the country's growth. It is important to highlight that refinery production in China increased by 15,4% in May compared to the previous year, with crude oil imports totaling 47.447 kilotons (equivalent to 11,22 million bpd).
At the end of a busy week, the speeches of the monetary authorities, in particular that of the Fed, leaving room for a possible increase in interest rates, shook the markets. However, the feeling that the contractionary currency cycle is coming to an end, combined with upbeat news out of China, has fueled hopes for a more favorable outlook for global demand. Both oil benchmarks saw a small weekly gain after declines over the past two weeks. Brent was up 94 cents to $76,61 (2,55%) and US WTI was up $1,16 to $71,78 (2,29%).
Credits : Press Office Content Communication
