GulfBase Live Support
Strong oil demand growth in emerging economies led by China and India but also from Europe is drawing down oil stockpiles faster than expected, putting the global market firmly on track to rebalance, senior industry executives said on Tuesday.
A surge in demand for diesel and fuel stock draws following US refinery outages resulting from Hurricane Harvey have further helped thrust crude prices to near US$60 a barrel, analysts said.
Global oil benchmark Brent rose to the highest since July 2015 on Tuesday after Turkey threatened to cut crude exports from Iraq's Kurdistan region before retreating slightly, Reuters said.
Prices rallied in the third quarter of this year as Opec and non-Opec producers cut output, and as Harvey knocked out large portions of the US refining industry.
"We see the market over the next six months going well above $60 for a simple reason ... surprisingly good demand," Adi Imsirovic, the head of oil trading at Gazprom Marketing and Trading, told the S&P Global Platts APPEC conference in Singapore.
"We see the market tightening strongly, we see oil moving out of storage quite fast," he added.
The premium of first-month Brent futures over second-month futures is at the highest since April 2016. That market structure, known as backwardation, indicates there is strong immediate demand for oil.
"There are forecasts that demand could pass the threshold of 100 million barrels per day (bpd) of crude and liquids even in the next months or next year," Eni Trading and Shipping chief executive Franco Magnani said at the conference.
"Most of the economies in the world are still growing or relatively stable," he added. Brent for November settlement was 37 cents lower at US$58.65 a barrel on the London-based ICE Futures Europe exchange on Tuesday afternoon after rising as much as 0.8 per cent earlier. Prices added $2.16 to $59.02 on Monday, the highest close since July 2015. The global benchmark traded at a premium of $6.62 to WTI.
Crude in New York fell 0.4 per cent as traders cashed in after Monday’s 3.1 per cent surge, according to Bloomberg.
"The big surprise ... has been on the distillate side, where it looks like we will hit 1.6 per cent growth," said Matti Lehmus, the vice president of oil products at the Finnish refiner Neste Oil.
Global demand growth is higher than that seen in the last couple of years, "coming somewhere close to 1.6 to 1.7 million barrels per day and is driven by distillates", said Janet Kong, BP's chief executive, supply and trading, Eastern Hemisphere.
Strong fuel demand was compounded by damage caused by Harvey, which hit the US Gulf Coast in August and knocked out almost a quarter of the country's refineries, resulting in large-scale fuel stock draws and increased imports.
"This is a products-led rally ... Even prior to Harvey, products were driving the [price] rally and were incentivising high refinery runs ... What Harvey did is accelerate a process that was already underway," said Robert Campbell, the head of oil products analysis at Energy Aspects.
Oil prices rose on Wednesday after inventory data showed a big drop in U.S. crude stocks although gains were capped by concerns over fuel demand with mounting global COVID-19 cases.
The Gulf Today
Oil rose to above $42 a barrel on Friday, adding to gains in the previous session, after OPEC producers and allies promised to meet supply cuts and signs of demand, hit by the coronavirus crisis, rec
The total global oil production in May amounted to 89.89 million barrels per day (bpd), marking a daily decrease of 10.04 million bpd compared to April, according to figures released by the Organisat
Major oil producers sharply cut back output in May, data showed on Wednesday, as part of a concerted effort to prop up prices that have fallen dramatically in the wake of the global coronavirus pande
Opec forecast that global oil demand will shrink by 9.1 million barrels per day to reach 90.06m bpd in 2020 but anticipates a recovery in demand during the second half of the year.