Crude Rally on Strong Crude Oil Consumption in India

April WTI crude oil (CLJ23) on Thursday closed up +1.44 (+1.95%), and Apr RBOB gasoline (RBJ23) closed up +3.46 (+1.36%).  

Crude oil and gasoline prices Thursday settled sharply higher.  Crude oil prices rallied Thursday on a forecast for record oil product demand in India, the world's third-biggest crude oil consumer.  Crude prices fell back from their best levels after the dollar climbed to a 1-1/2 month high, and weekly EIA crude inventories rose more than expected to a 1-3/4 year high.

Rising crude demand in India, the world's third-largest crude consumer, is bullish for prices.  India's oil ministry predicts India's oil-products consumption will climb by +4.9% y/y to a record 233.8 MT in the 12 months from April.  

In a bullish factor, Vortexa on Monday reported that the amount of crude stored on tankers that have been stationary for at least a week fell -8.4% w/w to 71.27 million bbl in the week ended February 17.

Recent Chinese news shows an uneven economic recovery that is bearish for energy demand.  In January, China's car production and sales fell more than -30% from a year ago.  Also, China's housing market remains in a slump as Jan home sales for the top hundred Chinese developers fell -33% y/y.  On the positive side, increasing Chinese air travel supports fuel demand and crude prices.  The Civil Aviation Administration of China (CACC) reported 55.2 million air passenger trips in China from January 7 to February 15, up +39% from the same time last year and at 76% of 2019's level.

On February 1, the OPEC+ Joint Ministerial Monitoring Committee recommended keeping crude production levels steady as the oil market awaits clarity on demand in China and crude supplies from Russia.  Goldman Sachs predicts that OPEC+ will only start to reverse its supply cuts, currently at about 2 million bpd, in the second half of this year when accelerating demand will tighten the market.  OPEC crude production in January fell by -60,000 bpd to 29.12 million bpd.  Saudi Arabian Energy Minister Abdulaziz bin Salman last Thursday said the OPEC+ alliance plans to maintain its oil deal set in October for the rest of this year.  Also, UAE Energy Minister Suhail Al Mazrouei said last Monday that despite Russia's plan to cut crude output, global oil markets remain balanced, and OPEC+ producers don't need to intervene.

Thursday's weekly EIA inventory report was mixed for crude and products.  On the bullish side, EIA gasoline supplies unexpectedly fell -1.8 million bbl versus expectations of a +900,000 bbl build.  Conversely, EIA crude inventories rose +7.65 million bbl to a 1-3/4 year high, exceeding expectations of a +2.8 million bbl build.  Also, EIA distillate stockpiles unexpectedly rose +2.7 million bbl versus expectations of a -1.2 million bbl draw.  In addition, crude supplies at Cushing, the delivery point of WTI futures, rose +700,000 bbl to a 1-1/2 year high.

Thursday's EIA report showed that (1) U.S. crude oil inventories as of February 17 were +9.1% above the seasonal 5-year average, (2) gasoline inventories were -5.4% below the seasonal 5-year average, and (3) distillate inventories were -12.4% below the 5-year seasonal average.  U.S. crude oil production in the week ended February 17 was unchanged w/w at a 2-3/4 year high of 12.3 million bpd, which is only 0.8 million bpd (-6.1%) below the Feb-2020 record-high of 13.1 million bpd.

Baker Hughes reported last Friday that active U.S. oil rigs in the week ended February 17 fell by -2 rigs to 607 rigs, moderately below the 2-1/2 year high of 627 rigs posted on December 2.  U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.

• Crude Climbs on Forecast for Record Crude Oil Consumption in India
• Crude Oil Falls on Concern Tighter Fed Policy Will Crimp Energy Demand
• Crude Oil Under Pressure on Concern about Hawkish Fed
• Crude Prices Modestly Lower on Uneven Recovery in China