Vaccine News & Fuel Demand Recovery
May 19, 2020
Crude oil and refined fuel product prices rose significantly yesterday and reached 2-month highs for most indexes. The rise in prices yesterday was mainly driven by good news about testing of a potential
COVID-19 vaccine, positive comments from the Federal Reserve, rising U.S. equities, and signs of fuel demand increasing along with signs of oil supplies starting to shrink in the U.S.
A COVID-19 vaccine under development by biotech firm, Moderna, produced protective antibodies in a small test of volunteers that were part of phase 1 testing. Moderna said that after 2 doses all 45 trial participants had developed coronavirus antibodies. The good news caused U.S. equities to rise along with crude oil prices in yesterday’s trading.
The Federal Reserve Chairman, Jerome Powell, said on Sunday that there is a lot more that the Federal Reserve can do to help the economy and that he had a lot more ammunition for lending programs. He also said he was confident that the U.S. economy will claw its way back from here but warned that it may not fully recover until a COVID –19 vaccine is complete.
Also boosting prices, EIA forecasted yesterday in their monthly “Drilling Productivity Report” that U.S. shale oil production from 7 major basins would fall by 197,000 bpd from May to June down to a total of 7.822 million bpd from 8.019 million bpd. This was adjusted close to 481,000 bpd lower over the last 3 months. U.S. shale oil growth is starting to slow significantly due to low oil prices
Bank of America Global Research reported that WTI prices could move above $35 per barrel by July and then pull back as rising oil prices reduce shut-ins and summer fuel demand peaks. It said with spare capacity so high, expect backwardation to occur at $40 per barrel to $45 per barrel, making it more difficult for producers to hedge their output. Bank of America expect Brent and WTI prices to average $37 per barrel and $32 per barrel in 2020 and $45 per barrel and $42 per barrel in 2021.
A recovery in fuel demand in India gathered momentum in the first half of May as curbs on transport
and industrial activity were partly lifted in areas that have contained the spread of the coronavirus. Demand for refined fuel is expected to increase further starting Monday as India has lifted more restrictions under its extended lockdown that runs until May 31st. State-refiners’ petrol sales in the
first half of May fell by 47.5% to 570,000 tons from a year ago but were up from 334,000 tons sold in the first half of April. State companies’ sales of gasoil fell about 38% to about 1.93 million tons in the first half of May from a year earlier.
OPEC+ has cut its oil exports sharply in the first half of May, suggesting a strong start in complying with a new production cut agreement. Kpler, a company that tracks oil flows, said OPEC+ seaborne crude oil exports fell by 6.3 million bpd over the past month towards 27 million bpd. Saudi Arabia is showing the largest cutback. Saudi oil exports have averaged 7.26 million bpd, down 2.24 million bpd on the month. Russia cut its output by 922,000 bpd in May. Also, Kuwait and the UAE loaded a combined 4.25 million bpd onto ships for export, down 1.26 million bpd on the month. Meanwhile, Petrologistics estimated that OPEC members cut crude oil exports by 4.85 million bpd in the first 14 days for May.