WTI Extends Gains, Above $64, As Gasoline Demand Hits Pre-Pandemic Levels

Oil prices are higher this morning, after dipping on API’s reported – and unexpected – crude build last night, as expectations strengthened for a revival in global consumption despite the resurgent pandemic in India and Brazil.

“The market expects a major revitalization for global oil demand from this summer onwards,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

“As vaccination campaigns progress and as lockdowns are set to soon be lifted in Europe and other recovering economies, the need for road and jet fuels will increase and the result will be felt.”

All eyes for now on Crude stocks after last night (and the prior week’s) surprise build.

API

• Crude +4.319mm (-200k exp)

• Cushing +742k

• Gasoline -1.288mm

• Distillates -2.417mm (-1.2mm exp)

DOE

• Crude +90k (-200k exp)

• Cushing +722k

• Gasoline +92k

• Distillates -3.342mm (-1.2mm exp)

After the prior week’s surprise crude build (and API’s surprise crude build for this week), analysts continued to expect official data to show a modest draw… but instead we saw a very modest 90k build. Distillates saw a 3rd straight week of draws…

Source: Bloomberg

Gasoline Demand is back to pre-pandemic levels for this time of year…

Source: Bloomberg

US crude production remains ‘disciplined’ despite rising rig counts and oil prices… for now…

Source: Bloomberg

WTI was hovering around $63.80 ahead of the official data and extended gains on the rise in gasoline demand…

The surge in prices suggests confidence in the demand picture:

“Powerful reflation signals, a weaker dollar and a powerful recovery in US energy demand are all painting a brighter picture for demand down the road,” TD Securities commodity strategists led by Bart Melek said in a note.

“OPEC’s cautious approach could offer a window for higher prices should energy demand continue to rise at a fast clip amid spreading vaccinations and travel.”

But, the risks to the demand outlook are starting to show up in gauges of market health, however.

The structure of the Middle Eastern Dubai benchmark slumped on Wednesday to only a shallow backwardation – an indication that tightness in crude supplies may be easing.