Demand for oil continues to greatly exceed supply

Crude oil prices rose on average about 1% week-over-week as investors remained focused on the strength of global oil supply and demand fundamentals heading into the winter.

Prices rose the most amid signs of a rapid tightening in the US oil market, particularly in Cushing, and a sharp drop in gasoline inventories. However, increasing cases of coronavirus disease (COVID-19) in several countries, concerns about global economic growth and a larger than expected increase in U.S. crude inventories last week limited gains.

Crude prices retreated, although they remained firm after the Energy Information Association announced a larger-than-expected increase in crude oil inventories in the United States, which allayed concerns about a tightening in the market. crude oil and prompted investors to profit from bullish long positions. Higher total US crude inventories offset lower crude inventories at Cushing and lower US gasoline and distillate inventories.

Prices have traded above $ 80 a barrel, a level that guarantees significant profits for U.S. shale producers, but there is no indication that this will lead to a significant increase in investment in the shale sector. It seems that American shale production is still mainly supported by the activation of drilled but unfinished wells compared to new drilled wells.

However, the longer prices stay high, the more likely it is that US crude production will return to growth.

India’s crude oil imports in September rose 16% to a five-month high, according to government data, as a pickup in economic activity and mobility led to increased demand for fuel.

China’s liquefied natural gas imports remained resilient, in particular thanks to long-term contracts, with utilization rates at major coastal terminals exceeding 90%.

Asian LNG spot prices fell slightly due to more cautious Chinese buyers, who largely pulled out of the spot market due to prohibitive prices. The LNG market is being balanced by further supply disruptions, most recently from Bontang LNG, where feed gas constraints are expected to remove up to one cargo per month from the market from November to mid-2022.

The success of vaccines and the reopening of social activities allowed the U.S. economy and oil consumption to thrive faster than other regional markets, and production, more recently hampered by Hurricane Ida, did has not been able to keep pace with the inflow of refineries. .

Growing demand for Indian diesel, tighter supplies from China and the start of seasonal refinery maintenance in the West are expected to keep diesel prices well supported ahead of the winter heating season.

Global refinery crude needs are expected to increase from November, as refineries resume major turnarounds and respond to the market’s call to replenish product inventory levels, given growing product tension.

The weather forecast in the United States tends towards colder-than-average weather in November and would likely lead to expectations of higher demand for heating fuel in the coming days.

The trajectory of oil prices remains bullish as natural gas prices remain firm, a potentially cold winter awaits just around the corner, and demand for oil continues to exceed supply.
Source: Arab News

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Felix J. Dixon

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