Oil Demand Linked to Vaccination Rates
June 4, 2021
The DOE said that crude oil stocks were down 5.08 million barrels a bigger decline than the market expected, but Cushing stocks were up 784,000 barrels helping to offset some of the bullish sentiment of the bigger than expected decline. Gasoline stocks were up 1.5 million barrels and distillates were up 3.72 million barrels. The build in gasoline was the first one since early May and the distillates build was the first since late March. Refinery utilization was up by 1.70% to 88.70% of capacity, the highest level since February of 2020. This uptick in refinery runs helped to eat into crude stocks and produce that big draw.
Propane stock showed a large build of 4.084 million barrels putting total stocks at 48.151 million barrels and last year there were 67.329 million barrels. Midwest stocks were up 653,000 barrels putting total stocks at 12.118 million barrels and last year there were 15.629 million barrels. Gulf Coast stocks were up 2.104 million barrels putting Gulf stocks at 27.758 and last year there were 43.068 million barrels. The build to stocks was a welcome sight as propane has a long way to go to get to some comfortable level during this build season. There are roughly 16 weeks left in the this build season and it is debatable but 80 to 100 million would be a “normal” target for a comfortable level of supplies heading into winter. 80 million from the current 48 million is 32 million barrels. That is roughly a 2 million barrels build every week for the next 16 weeks. That seems unlikely at this point so current prices should continue to be supported.
Despite a lot of positive economic data lately the jobs number released this morning was a disappointment. 599,000 new jobs were added in May. This was less than the 671,000 new jobs estimated by Dow Jones survey. With all the current bullish sentiment the market is likely to brush this off.
State Department spokesman, Ned Price, said the United States expects to have a sixth round of indirect talks on reviving the Iran nuclear deal and would predict for negotiation to extend into further subsequent rounds.
JPMorgan analysts said a higher than expected oil demand scenario could cause prices to peak towards $80 per bared earlier than the bank’s base-case scenario of late 2021.
JPMorgan research in a recent note said that oil demand recovery is largely a function of vaccinations. While North America and Europe advance their inoculations efforts, sluggish vaccination rollout in developed and emerging Asian countries provide no clear end to social distancing in the region. The research team’s demand estimates call for global oil demand to grow by 4.6 million bpd over the summer, a recovery more than 2.7 million bpd stronger than the seasonal bounce in 2019.