Citi Analysts Say Global Oil Markets Are in “Fragile Balance”
January 14, 2022
Energy prices were down slightly except for the front-month ULSD, benefiting from increased heating oil demand in the East. Prices were off on profit-taking as traders were concerned about 40-year high inflation, causing the Federal Reserve to indicate they will raise rates four times this year starting in March.
The US Department of Energy said six companies had been named winners in the sale of US strategic crude reserves. It sold 18.1 million barrels of crude oil to Valero Marketing and Supply, Phillips 66, Motiva Enterprises, Marathon Petroleum, Gunvor USA, and Exxon Mobil. It said Valero bought more than 8 million barrels.
Energy Aspects sees global gasoline demand surpassing pre-pandemic levels this year, with limited downside risk from Covid. It said global gasoline demand is forecast to increase by 920,000 BPD on the year to 26.55 million BPD in 2022, surpassing 2019 levels.
Citi analysts said global oil markets will be in a fragile balance in the first three months of the year but will then move into a structural surplus that will continue over the next seven quarters. The recent price rally is due to supply disruptions and improved demand. However, supply disruptions are subsiding as weather-related outages ease.
Morgan Stanley said oil prices would continue to increase in the second half of 2022 on the back of a “Triple Deficit” of low inventories, low spare capacity, and low investments. It sees the price of Brent reaching $90 per barrel by the second half of the year.
Reuters reports that China will release crude from its national strategic stockpiles around the Lunar New Year holiday that start February 1. The release is part of a plan coordinated by the United States with other major consumers to reduce global oil prices, sources told Reuters.
China’s annual crude oil imports slid 5.4% in 2021, dropping for the first time since 2001, as Beijing clamped down on the refining sector to curb excess domestic fuel production while refiners drew down massive inventories.