Oil Down Despite Several Indicators Of Imminent Demand Recovery

Wood Mackenzie predicts a 7 percent global oil demand rise this year: File Image/Pixabay

Seemingly immune to any promising news about demand recovery in 2021, crude traders on Thursday maintained their concern that recovery might be slower than anticipated - and as a result, two key benchmarks ended their sessions lower.

Brent fell 28 cents to settle at $55.53 per barrel, while West Texas Intermediate ended 51 cents lower at $52.34; the losses were said to be triggered by news of stricter Covid vaccine checks by the European Union and delivery hold-ups from AstraZeneca and Pfizer Inc.

However, a host of promising reports on Thursday minimized losses: the premium of the Brent front-month over the second month rose to its highest level since February 2020 for a fourth day in a row, and this caused Jim Ritterbusch, president of Ritterbusch and Associates, to remark, “We ... view the strong curve as indicative of tightening balances in which upcoming Saudi production cuts are more than offsetting increased demand concerns related to the coronavirus.”

He was referring to Saudi Arabia’s pledge to voluntarily cut output by 1 million barrels per day (bpd) in February and March.

Also, the U.S. 3-2-1 crack spread, a measure of the profit margin for refining crude into gasoline and distillate, closed at its highest since May 2020; the gasoline crack spread ended at its highest close since June 2020.

However, the damage done by government lockdowns to slow the spread of Covid continued to concern crude traders: data released Thursday showed 847,000 more people likely filed U.S. jobless claims last week.

Still, to date 82.4 million people globally have received the Covid vaccination, and with ramping up the pace regarded as inevitable, Wood Mackenzie on Thursday said it predicts global oil demand to rise by nearly 7 percent this year.

Ann-Louise Hittle, vice president of the consultancy, remarked, “Our short-term forecast assumes vaccine distribution accelerating through 2021 and is underpinned by 5 percent expected growth in global GDP, according to our macroeconomic outlook, following the global economy’s 5.4 percent contraction last year.”

Total liquids demand is expected to average 96.7 million bpd in 2021, 6.3 million bpd higher than last year.

More promising news for the crude market on Thursday came from Refinitiv, which reported that Asia’s crude oil imports are off to a roaring start in the New Year with a total of 26.14 million bpd forecast to be discharged in January and led by China at 12 million bpd; also, demand in India is recovering strongly with Refinitiv estimating January arrivals at 4.68 million bpd.