On Friday morning (August 1st) in the Asian market, international oil prices hovered around a high of over a week, with US crude oil currently trading around $78.59 per barrel. Oil prices rebounded strongly by nearly 5% on Wednesday, far from the nearly two month low hit on Tuesday. After the assassination of Hamas leader in Iran, investors are concerned that the Middle East conflict may escalate, and US crude oil inventories have dropped significantly. The Federal Reserve has sent a signal to the market to cut interest rates in September, and the sharp decline in the US dollar index has also provided upward momentum for oil prices.

The settlement price of Brent crude oil futures for September delivery, which expires on Wednesday, rose by $2.09, or 2.66%, to $80.72 per barrel. The more actively traded October futures rose $2.77 to $80.84, closing at $81.51 per barrel, an increase of approximately 3.74%.

US crude oil futures rose $3.18, or 4.26%, on Wednesday, settling at $77.91 per barrel, the largest daily increase since October 2023; The closing price was $78.64 per barrel, up 4.62% from the previous day's closing price.

Nevertheless, Brent crude oil futures fell nearly 7% in July, while US crude oil futures fell nearly 4% on a monthly basis.

Government data shows that US crude oil inventories decreased by 3.4 million barrels last week, with Reuters analysts expecting a decrease of 1.1 million barrels. Crude oil inventories have been declining for the fifth consecutive week, marking the longest continuous decline since January 2021.

Kpler's Chief Oil Analyst Matt Smith said, "Strong exports helped outweigh the impact of reduced refining activity and strong imports, driving crude oil inventories down for the fifth consecutive week." He called the report a "slight support" for oil prices.

He said, 'Geopolitical risks remain the main driving force behind today's rise in oil prices.'.

The news of the assassination of Hamas leader Ismail Haniyeh in Iran has escalated tensions in the Middle East overnight.

The US dollar index fell 0.4% on Wednesday, which also provided support for oil prices. The Federal Reserve maintains interest rates unchanged, but has opened the door for reducing borrowing costs at its next meeting in September at the earliest.

The Joint Ministerial Monitoring Committee (JMMC) of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, will hold a meeting on Thursday. It is expected that the alliance will maintain its current production policy unchanged and cancel some production cuts starting from October.

On this trading day, investors also need to pay attention to the market's further interpretation of the Federal Reserve's interest rate decision, further news on the geopolitical situation, the US July ISM Manufacturing PMI, and the number of initial jobless claims in the US for the week ending July 27th.

Daily chart of major US crude oil contracts

The death of Hamas leader Haniyeh may trigger retaliatory actions and escalate the Middle East conflict

Ismail Haniyeh, leader of the Palestinian armed group Hamas, was assassinated in the Iranian capital Tehran early on Wednesday morning. This attack may face retaliation from Israel and raise concerns that the Gaza conflict will escalate into a broader Middle East war.

Hamas and the Iranian Revolutionary Guard have confirmed the death of Haniyeh. The Iranian Revolutionary Guard Corps stated that Haniyeh had just attended the inauguration ceremony of the new Iranian president a few hours before the attack.

Although it is widely believed that the killing of Haniyeh was carried out by Israel, the Netanyahu government has not claimed responsibility for the matter and has stated that it will not make any comments on it.

At a press conference held in Tehran, senior Hamas official Khalil Al Hayya quoted eyewitnesses who were with Haniyeh at the time as saying that a missile "directly" hit the state guesthouse where Haniyeh was located, resulting in his death. Haniyeh is based in Qatar and serves as the spokesperson for Hamas' international diplomacy. He has been involved in indirect talks on the Gaza ceasefire issue mediated by the international community.

Netanyahu did not mention the killing of Haniyeh in his televised speech on Wednesday evening, but stated that Israel has recently launched a crushing attack on Iranian proxies, including Hamas and Hezbollah, and will respond strongly if attacked.

The Hamas armed group stated in a statement that the killing of Haniyeh has taken the struggle to new heights and has had a significant impact. Iran vows retaliation, declares three days of national mourning, and holds the United States responsible for supporting Israel.

In Türkiye, thousands of Palestinian supporters took to the streets of central Istanbul on Wednesday evening to protest the killing of Haniye.

Washington is concerned about the possibility of escalation of the situation. But White House National Security spokesman John Kirby said that the United States does not believe that the escalation of the situation is imminent or inevitable, and is working to prevent it. The US government advises citizens not to travel to Lebanon, and two American airlines, United Airlines and Delta Air Lines, have suspended flights to Tel Aviv.

Less than 24 hours before the assassination, Israel claimed to have killed the highest ranking military commander of Hezbollah in retaliation for launching a deadly rocket attack on the Golan Heights. Hezbollah confirms that senior military commander Fuad Shukr was killed in an Israeli airstrike on the outskirts of Beirut.

Ayatollah Khamenei, the Supreme Leader of Iran, stated that Israel has provided a reason to "punish itself severely" and Tehran has a responsibility to seek revenge for the death of Haniyeh

US media: Iranian leader orders direct attack on Israel

According to a report by The New York Times, three Iranian officials revealed that Iran's Supreme Leader, Ayatollah Khamenei, issued an order during an emergency meeting calling for Iran to directly strike Israel in retaliation for the death of Hamas leader Haniyeh in Tehran.

Iran and Hamas accuse Israel of carrying out an assassination on Haniya, who was attending the inauguration ceremony of Iran's new president in Tehran at the time. It is still unclear how strong Iran's response will be, and whether it will adjust its attack again to avoid escalation of the situation.

Iranian officials have stated that Iranian military commanders are considering launching another joint drone and missile attack on military targets near Tel Aviv and Haifa, but will be careful to avoid attacking civilian targets. One option being considered is to launch a coordinated attack from Iran and other allied fronts, including Yemen, Syria, and Iraq, to achieve maximum effectiveness.

The Federal Reserve signals a possible interest rate cut in September, with the US dollar index hitting a nearly two-week low

The Federal Reserve held interest rates unchanged on Wednesday, but opened the door for reducing borrowing costs at its next meeting in September at the earliest. This caused the US dollar index to drop 0.4% to a two-week low of 103.92, closing at 104.09.

Federal Reserve Chairman Powell commented after a two-day meeting that if inflation declines as expected, economic growth remains reasonably strong, and the labor market remains unchanged, then interest rate cuts could be on the agenda as early as September.

But he also stated that the Federal Reserve still relies on data and has not made any decisions on future meetings.

Adam Button, Chief Monetary Analyst at ForexLive in Toronto, said, "The Federal Reserve wants data to play a role for a longer period of time, even at the risk of falling behind the curve

Traders have fully factored the September rate cut into prices, which may ease the pressure on the Federal Reserve to send some kind of action signal at that time.

Button said, "Everyone in the market knows this has been digested, and the Federal Reserve also knows this has been digested, so not retaliating is a tacit approval of market pricing

Traders also expect the Federal Reserve to cut interest rates for the second and possibly third time before the end of the year.

The next important US economic data that may drive Federal Reserve policy will be the July government employment report released on Friday. According to the median estimate of economists surveyed by Reuters, the report is expected to show that employers added 175000 jobs in the month.

The ADP National Employment Report released on Wednesday showed that private sector jobs increased by 122000 this month, lower than economists' expectations of 150000.

EIA Inventory Weekly Report: US crude oil and gasoline inventories decline more than expected

The data released by the US Energy Information Administration (EIA) on Wednesday showed that due to strong export demand, US crude oil and gasoline inventories fell significantly last week.

EIA reported that crude oil inventories decreased by 3.4 million barrels to 433 million barrels in the week ending July 26, with Reuters analysts expecting a decrease of 1.1 million barrels.

EIA reported that the inventory of US crude oil futures delivery center in Cushing, Oklahoma decreased by 1.1 million barrels last week.

EIA reported that crude oil exports increased by 733000 barrels per day last week, reaching 4.9 million barrels per day, resulting in a decrease of 651000 barrels per day in net crude oil imports (USOICI=ECI), to just over 2 million barrels per day.

EIA reported that gasoline inventory USOIL=ECI decreased by 3.7 million barrels last week to 223.8 million barrels, with an expected decrease of 1 million barrels.

However, the inventory of distillate oils including diesel and heating oil, USOIL=ECI, unexpectedly increased by 1.5 million barrels to 126.8 million barrels, with an expected decrease of 1.2 million barrels. The inventory of distillate oil on the East Coast has increased to the highest level since March 2023.

Last week, the refinery's refining capacity USOICR=ECI decreased by 257000 barrels per day, and the capacity utilization rate USOIRU=ECI decreased by 1.5 percentage points to 90.1%. (End)

EIA: US May oil demand hits seasonal record high, production falls for first time since January

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The data released by the US Energy Information Administration (EIA) on Wednesday showed that the demand for oil in the United States set a seasonal record in May, as gasoline consumption by US cars reached its highest level since before the outbreak of the pandemic.

The data shows that the total supply of crude oil and petroleum products in May - the demand barometer indicator of EIA - increased by 792000 barrels per day compared to the previous month, reaching 20.8 million barrels per day. This is the highest monthly data since August last year, and also the highest record for May in history.

This data marks a significant reversal in the trajectory of US oil demand, after weekly data from the German EIA showed that oil demand in May was only around 20 million barrels per day.

Gasoline demand has risen to a post pandemic high of 9.4 million barrels per day, the highest since August 2019.

The last peak in gasoline consumption in the United States after the pandemic was 9.36 million barrels per day in June 2021. The demand for gasoline in the United States typically peaks during the summer driving season.

UBS analyst Giovanni Staunovo said that although the market is unlikely to react to this data due to time lag, it should lead forecasters to raise their forecasts for the growth of US oil demand this year.

The United States is the world's largest consumer of oil, so its demand trajectory is crucial for global markets and energy transition goals.

Meanwhile, EIA data shows that US crude oil production decreased in May, marking the first monthly decline since January, while natural gas production fell to its lowest point since February 2023.

EIA stated that crude oil production in May decreased by 61000 barrels per day to 13.18 million barrels per day, as the reduction in production from the Federal Coast of the Gulf of Mexico and North Dakota offset record breaking production from Texas and New Mexico.