Crude Oil Prices Hold Gains As Stockpiles Fall, OPEC Lifts Demand Outlook

Crude oil prices traded steadily during Wednesday’s APAC trade after rising 0.94% a day ago. Prices are buoyed by falling API crude inventories and demand optimism highlighted by OPEC. Colonial Pipeline outages caused significant disruptions among Gulf Coast refineries and end-users along the East Coast. Traders are also eyeing US inflation figures today for clues about the Fed’s take on rising price levels.

The American Petroleum Institute (API) reported a 2.53-million-barrel draw in crude stockpiles for the week ending May 7th, compared to a forecasted decline of 2.1 million barrels. In the prior week, inventories dropped by 7.69 million barrels, underscoring rising fuel demand as economic recovery gathers pace. Since mid-March, total inventories have fallen by 17.6 million to 485.11 million barrels (chart below).

WTI vs. DOE Crude Oil Total Inventory Data

Crude Oil Prices Hold Gains as Stockpiles Fall, OPEC Lifts Demand Outlook

Source: Bloomberg, DailyFX

OPEC maintained its optimistic outlook for oil demand in a monthly report on Tuesday, saying that consumption will rise by 5.95 million barrels per day (bpd) in 2021, or 6.6% YoY. The energy demand outlook is brightened by eased lockdown measures in parts of the US and Europe, as well as strong recovery in China. This may help to offset the adverse impact brought by the pandemic in India and other parts of the world. Previously, the oil cartel decided at a meeting in early April to gradually increase production from May to July to meet rising demand.

A major US pipeline outage had a significant impact on fuel supply in the eastern part of the country. While gasoline stocks are running out in parts of the East Coast, some refineries in the Gulf area are forced to reduce processing rates as fuel inventories stock up. If the incident persists, it may lead to higher crude inventories in the days to come and undermine any boost from the summer driving season. Operators of the Colonial Pipeline will decide on late Wednesday whether it is ready to resume operating.

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