UBS Bank Forecasts Oil Market to be Undersupplied in 2021
April 28, 2021
Crude oil and refined fuel product prices closed higher yesterday upon the news the OPEC+ met a day earlier than planned and decided to keep their current plan to gradually raise oil output for May through July. The market saw this as a positive with OPEC+ appearing to not be overly concerned about the record daily cases of COVID-19 currently seen in India. OPEC+ decided on April 1, 2021 to raise output by 350,000 bpd for May and June and by 441,000 bpd for July. Saudi Arabia will also ease voluntary cuts by 250,000 bpd in May, 350,000 in June, and by 400,000 bpd in July. OPEC+ appears to think that demand will continue to improve despite the recent rise in cases in India.
UBS Bank sees the oil market undersupplied by 1.5 million bpd this year due to OPEC+ oil output cuts and cautious approach. UBS is forecasting Brent crude oil to be $75 per barrel in the second half of 2021.
The American Petroleum Institute (API) called crude stocks up 4.3 million barrels and the stocks at Cushing, Ok were up 742,000 barrels. Gasoline stocks were down 1.3 million barrels, and distillates were down 2.4 million barrels. The average estimates from S&P Global Platt’s for today’s DOE inventory update are for crude to be down 200,000 barrels, gasoline suppliers unchanged and distillates down 1.2 million barrels.
US renewable fuel credits increased on Tuesday to the highest price on record, as higher costs for soybean oil pushed up both renewable fuel and biomass-based credits. Ethanol (D6) credits traded at $1.50 up from $1.44 the previous day. Biomass-based (D4) credits traded at $1.58 up from $1.52 the previous day.
The estimates for today’s propane inventory report are for there to be a build to stocks of 740,000 barrels.