Crude Oil Demand in China Grows
December 29, 2020
The market was very lightly traded and very uneventful yesterday. The rest of the week looks to be more of the same with no major moves just more congestion. The market has not been able to breakout on to the upside and it will very likely need a breakdown in the US Dollar to bust it out.
Gasoline inventories are expected to increase by 2.3 million barrels in this week’s inventory update putting total stocks around 240 million barrels. Holiday driving activity has been reported as the weakest since Easter but still typical of a Holiday weekend it was muted by covid restrictions.
The market for crude does have to deal with the fact that OPEC+ will increase production starting January 1 by 500,000 bpd. Russia is also considering increasing production by 500,000 bpd in February. Russia’s motivation could be to try and keep US shale activity depressed and they have seen the recent increase in rig numbers and may see the possibility of more barrel on the market muting those increase in rigs. Libya and Iran’s increased exports are also a factor that could weigh on crude prices but for now weak dollar and markets looking at better times in the future continue to add support.
China has been a bright spot for energy demand as their demand for crude oil export from the US have increased dramatically.
Propane prices continue to be supported by good export demand. Petrochemical demand and winter weather demand in the export markets have better economics than the US market currently.
The markets continue to focus on the roll out of the vaccines and hope for economies to reopen and energy demand to rebound keeping prices supported.