One cent shy of USD 90 per barrel

In the past two days, there has been a notable surge in the Brent Crude price, maintaining a consistent sideways trend this morning. Overall, the oil price has risen by nearly USD 8 per barrel since mid-March, roughly 10%, and is presently trading at USD 89.4 per barrel.

Ole R. Hvalbye,
Analyst Commodities, SEB

This recent upward momentum in the market is primarily attributed to favorable market fundamentals rather than geopolitical risk premiums. Such a trend indicates that the market is anticipating a cyclical upturn, supported by positive manufacturing PMIs from both the US and China (refer to the ”Broad-Based Macro” section attached).

Against this backdrop, we hold the belief that the robust market fundamentals are compelling enough to drive the price to USD 90 per barrel, although short-term geopolitical developments may be needed to provide sufficient support.

Regarding market fundamentals, the spot price for Crude reached an impressive USD 89.99 per barrel yesterday, just moments before the release of the US Department of Energy’s (DOE) report on US crude and product inventories at 16:30 CET. The bullish momentum followed Tuesday’s data from the US American Petroleum Institute (API), indicating a significant drawdown of 6.4 million barrels in US crude and product inventories last week. This drawdown far exceeded the anticipated ”normal” inventory build of 3.8 million barrels for this time of the year.

However, the initial bullish sentiment waned when the US DOE data was slightly disappointing compared to the API figures. Nonetheless, the US DOE report indicated a decrease of 2.182 million barrels in total commercial crude and product inventories (excl. SPR), contrary to the expected seasonal build of 3.8 million barrels. Consequently, the US DOE report leaned towards the bullish side, resulting in a sideways movement in the Crude price (more below).

In essence, the unexpected decline in US inventories, contrary to the usual trend, reinforces our positive outlook on market fundamentals. Additionally, yesterday’s bullish sentiment was further fueled by OPEC+ ministers confirming the continuation of current supply cuts. OPEC and its allies chose to maintain their existing output reduction measures, ensuring that roughly 2 million barrels per day of cuts will persist until the end of June.

Overall, a bullish US Inventory report. In the US, crude oil refinery inputs averaged 15.9 million barrels per day, slightly lower than the previous week, with refineries operating at 88.6% capacity. Gasoline production increased to 10.0 million barrels per day, while distillate fuel production decreased to 4.6 million barrels per day.

Crude oil imports averaged 6.6 million barrels per day, showing a slight decrease from the previous week but up by 0.9% compared to the same period last year. Motor gasoline imports totaled 488 thousand barrels per day, and distillate fuel imports were at 104 thousand barrels per day.

Commercial crude oil inventories in the US (excl. SPR) increased by 3.2 million barrels to 451.4 million barrels, and about 2% below the five-year average for this time of year. Motor gasoline inventories decreased by 4.3 million barrels, while distillate fuel inventories decreased by 1.3 million barrels. Propane/propylene inventories decreased by 0.4 million barrels, and total commercial petroleum inventories decreased by 2.2 million barrels.

Over the past four weeks, total products supplied (implied demand) averaged 20.3 million barrels per day, showing a 1.4% increase from the same period last year. Motor gasoline product supplied averaged 9.0 million barrels per day, down by 0.5% from last year, while distillate fuel product supplied decreased by 6.3%. Jet fuel product supplied increased by 1.2% compared to the same four-week period last year.

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