Oil Back On Track As OPEC Predicts Second Half Consumption Surge

by Ship & Bunker News Team
Thursday March 11, 2021

A weak U.S. dollar and encouraging economic recovery news caused oil to resume its winning streak on Thursday, with price gains of over 2 percent.

After it was reported that fewer than expected Americans filed new claims for unemployment benefits last week and the Energy Information Administration posting a massive 11.9 million barrel drop in gasoline stocks, West Texas Intermediate ended the session $1.58, or 2.5 percent, higher at $66.02.

Brent settled up $1.73, or 2.6 percent, to $69.63 per barrel.

Crude was also supported by the Organization of the Petroleum Exporting Countries (OPEC) stating in its monthly report that demand will rise by 5.89 million barrels per day (bpd) in 2021, or 6.5 percent, up slightly from last month.

The cartel added, “Total oil demand is foreseen to reach 96.3 million bpd with most consumption appearing in the second half.”

However, OPEC warned that “Oil-intensive sectors, especially travel and transportation, will remain disproportionately affected, with a larger negative impact on 2020 oil demand and a lower positive contribution to 2021 oil demand, relative to global economic growth.”

Meanwhile, John Kemp, commodities analyst at Reuters, noted on Thursday that total stocks of crude and products have fallen by 168 million barrels since July, "largely reversing the 198 million build between March and June associated with the epidemic and volume war between Saudi Arabia and Russia."

He added that U.S. refineries will have to accelerate crude processing and fuel production in the next few months to prevent stocks from depleting further, and if coronavirus controls on travel, services and international passenger aviation are relaxed,"that would provide an even bigger boost to consumption."

In summarizing Thursday's trading, Ryan Fitzmaurice, commodities strategist at Rabobank, said, “Refined products and particularly gasoline has been leading the most recent charge higher in oil prices.

“On the demand-side, the vaccine rollout is progressing quite rapidly, boding well for a surge in summer driving, especially in the West which has lagged the economic recovery witnessed in Asia.”