USD Props Up The Complex


After edging higher yesterday, oil markets have continued to strengthen this morning, with ICE Brent breaking back above US$64/bbl. Weakness in the USD has provided some support. Reports that Iran will increase its uranium enrichment activity are also somewhat supportive, with it suggesting that a return of the US to the Iranian nuclear deal is likely to be some way off, and therefore the lifting of sanctions. API numbers released overnight were also mildly constructive for crude, with US crude oil inventories declining by 3.61MMbbls over the last week, larger than the roughly 2.7MMbbls draw the market was expecting. The API also reported that distillate fuel oil stocks fell by 3MMbbls, while gasoline inventories increased by 5.57MMbbls. If the EIA reports a similar gasoline number today, it would be the largest gasoline build since April last year.

Latest trade data yesterday also showed that crude oil imports into China averaged 11.74MMbbls/d over March, up 20% YoY, and the strongest monthly imports since September last year when imports averaged 11.85MMbbls/d. The strong YoY recovery shouldn’t come as too much of a surprise, given the impact of Covid-19 lockdowns in early 2020.

Yesterday also saw OPEC release its monthly market report which showed that OPEC production in March increased by 201Mbbls/d to average 25.04MMbbls/d over the month. The key driver behind the increase was Iran, who increases supply by 137Mbbls/d MoM to a little over 2.3MMbbls/d. If this is a trend that continues, obviously the impact from the potential lifting of sanctions would be less severe for the market. The group made minor changes to non-OPEC supply estimates, with supply estimated to increase by 930Mbbls/d this year, compared to a previous estimate of 950Mbbls/d. There were large revisions to demand estimates, with OPEC revising lower estimated global demand over 2Q21 by 520Mbbls/d. However, this decrease was offset by increases in all other quarters this year, and overall OPEC expect demand to grow by 5.95MMbbls/d YoY, compared to the previous forecast of 5.89MMbbls/d.

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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