Energy Report: Oil Indicator Optimism

Oil prices hit a new nine-month high as Asian oil demand is exploding, and the Fed is saying they still have our back. The Energy Information Administration (EIA) also helped by showing a crude draw of 3.1 million barrels and a hefty 793.000 million barrel jump in U.S. oil exports, and a significant 1.1 million barrel a day drop in oil imports.

The recent crude oil moves seemed to foreshadow what the Fed said yesterday about the U.S. economy and jobs market. The economic outlook and jobs are improving, leading to higher energy prices. The Fed was even optimistic about U.S. growth, raising its 2021 real GDP forecast to 4.2% from 4.0%. They markedly improved their outlook for the unemployment rate. They lowered their forecast from 6.7% down from a previous 7.6% projection in September.


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The crude oil market is moving to post-pandemic highs because we are starting to price in a strong rebound in the U.S. economy. Yet it is China and India that is tightening supplies in Asia. Record-breaking refinery runs in China and India refiners running at full capacity show that global demand will recover much faster than many had predicted. By the way, a lot of that oil that China and India are refining is coming from the U.S. shale patch.

U.S gasoline demand ticked back up. The weekly implied market jumped 5% to 7.98 million b/d, yet it was 15% behind year-ago levels, up from around 14% behind year-ago levels during the week prior. The four-week moving average of implied demand fell for a fifth straight week and was the lowest since the week ended June 19 after falling 1% to 7.92 million barrels per day.

Distillate fuel inventories increased by 0.2 million barrels last week and are about 11% above the five-year average for this time of year. S&P Global Platts says that refinery net crude inputs fell 250,000 b/d to 14.18 million b/d amid a 0.8 percentage point pullback in refinery utilization to 79.1% of total capacity. Crude inputs were nearly 16% behind the five-year average, but despite the week-on-week decline, they were still generally trending higher, and the four-week moving average edged up to 14.22 million b/d, a 15-week high.

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