Aohui official website: Weak market demand and easing supply-side pressure, beware of downward acceleration of bears

 The latest data from the U.S. Energy Information Administration (EIA) shows that U.S. crude oil inventories fell by 1.495 million barrels in the week ending February 23.Aohui official websiteThe decline was higher than market expectations of 1.90 million barrels. The change was mainly driven by higher refinery operating rates, but at the same time, the growth in refined oil inventories showed signs of weak market demand.

Gasoline inventories rose by 1.405 million barrels, and the market had expected to decrease by 1.90 million barrels, but the actual data greatly exceeded expectations.

Distillate inventories increased by 292,000 barrels, and the market had expected a decrease of 2 million barrels, reflecting weak demand, resulting in a larger-than-expected build-up of inventories.

The U.S. refinery operating rate rose 1.1 percentage points to 82.9 percent, indicating that refineries are ramping up production but demand is not growing in tandem.

Bob Yawger, head of energy futures at Mizuho Bank, said: "We saw knee-jerk reflections and fell. It was a bit of a surprise because crude inventories fell so much, but the build-up in refined product inventories reflects weak demand."

The market had expected that the increase in US refining activity would lead to a decline in overall inventories, but the actual situation was that both gasoline and distillate inventories rose, indicating weak demand for refined oil products and causing investors to worry about the future market outlook.

The easing of the situation in Russia and Ukraine is expected to exacerbate supply uncertainty

In addition to the inventory factor, market expectations for a possible peace deal between Russia and Ukraine continue to influence oil prices. According to market surveys, the progress of negotiations between Russia and Ukraine has triggered a reassessment of the market's future supply situation.

"This will bring us one step closer to lifting sanctions on Russia and remove much of the supply uncertainty hanging over the market," ING commodity strategists said in a note.

The energy supply shortage caused by the conflict between Russia and Ukraine was one of the key drivers of the rise in oil prices. Once the two sides reach an agreement, the market's concerns about Russian oil supply will be greatly eased, thus weakening the support factor for oil prices.

In addition, Ukrainian President Zelensky plans to visit Washington and sign a rare earth minerals agreement with the United States, which is also interpreted by the market as an important factor affecting future energy supply and demand.

The United States adjusts its oil policy towards Venezuela, adding further uncertainties to the market

The US administration's change in oil policy also added new uncertainty to the market. President Donald Trump announced that he would revoke oil concessions granted to Venezuela by the Biden administration, citing the Venezuelan government's failure to make substantive progress on electoral reform and immigration.

The reversal of a policy that allowed Chevron to expand its production in Venezuela and export the country's crude to the US could affect the global supply landscape by limiting the ability of Venezuelan crude to reach the market.

In the short term, the decision may tighten market supply, but the upside for prices remains limited in the context of weak demand.

Editor's View: Inventory Changes, Policy Adjustments, and Market Sentiment Combined to Pressure Oil Prices

Weak growth in US refined oil demand, according to inventory data, weighed on oil prices, while the prospect of a de ́ tente in Russia and Ukraine has increased, undermining market fears of supply disruptions and leaving oil prices without upward momentum.

In addition, the adjustment of the US oil policy towards Venezuela may affect future supply expectations, but in the current environment of sluggish demand, the short-term market may still be dominated by fluctuations.

This trading day, we need to keep an eye on whether the US GDP data and the trend of the US dollar index are again pressuring oil prices to accelerate downwards.