By Saket Sundria and Alex Longley on 3/12/2021
U.S. motor fuels demand begins recovery from lockdown weakness.
SINGAPORE (Bloomberg) –Oil steadied with the market facing a mixed demand outlook after a recent rally and the dollar climbing.
Futures in London were little changed below $70. The demand picture remains uneven across various regions, with Indian fuel sales falling in February amid higher pump prices, while demand is climbing in America and the UK.
The global Brent benchmark started this week with a push above $70 a barrel after attacks on Saudi oil infrastructure, before retreating. While attention is centered on the recovery in demand and OPEC+ policy, there are concerns higher prices might encourage a surge in U.S. production by shale drillers in a move that would add to supply concerns amid sharply-rising flows of Iranian crude into China.
“We’ve tested the $70-$72 resistance for Brent, and that level held pretty well,” said Hans Van Cleef, senior Energy Economist at ABN Amro. “I’m still cautious for a serious downward correction.”
The availability of crude cargoes, meanwhile, remains tight due to the OPEC+ curbs. Some oil processors in Asia will get less crude than they asked for next month from Saudi Arabia as the producer extends its unilateral output cuts. Three refiners will receive almost 20% less supply than requested.
- Brent for May settlement rose was little changed at $69.63 a barrel at 10:11 a.m. London time
- West Texas Intermediate for April delivery lost 11 cents to $65.91
The prompt timespread for Brent was 66 cents a barrel in backwardation — a bullish market structure where near-dated prices are more expensive than later-dated ones — compared with as little as 45 cents earlier in the week.
OPEC on Thursday sounded a note of caution on the outlook, trimming its forecasts for the amount of crude it will need to pump over the next two quarters. All eyes will be on an International Energy Agency report next week, which will publish forward-looking demand forecasts, while the market will also be watching for clues on the health of the U.S.-China relationship following a high-level meeting set for March 18-19 in Alaska.
Other oil-market news:
- Royal Dutch Shell Plc disclosed the profitability of its sprawling and secretive oil trading unit for the first time, saying it almost doubled to $2.6 billion.
- Europe’s diesel margin fell to its lowest since November, with U.S. refiners ramping up operations again after last month’s big freeze.
- Since Saudi Arabia stunned the global oil market with a large cut in crude production in January, traders have been draining crude supplies from St. Lucia and Freeport in the Bahamas to capitalize on the surge in crude prices.
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