Oil prices rose on Wednesday on expectation for a significant draw in US crude oil stocks last week, but Covid-19 remains a concern.
Rystad Energy’s daily market comment comes from its Head of Oil Markets, Bjornar Tonhaugen:
"The market needed some positive news and today oil prices are rising, pricing in what looks like a sizeable decline in US crude inventories.
Prices were getting depressed in recent days due to projections for a stall in oil demand, while supply is rising from this month.
However, draws of such volumes may be difficult to record again later this summer, taking into account that global supply is rising from August.
Our own expectations are not far from API’s survey that projected draws of 8.6 million bpd. Rystad Energy expect US commercial crude stockpiles to fall by at least 5 million barrels for week 31, amid robust refinery activity and low net crude imports.
US commercial stocks are expected to register a weekly decline as net crude imports will likely remain at a low level, despite imports rising to 5.9 million bpd.
We see US refinery activity remaining strong, averaging about 14.6 million bpd for the week, still far below the 16.9 million bpd seasonal 5-year average but showing resiliency since nosediving in mid-March.
Covid-19 remains a concern and the continuous rise in infections will likely keep prices in check for the remainder of the summer, lacking any other bullish news.
Infections are rising in the US and Europe seems to be rolling into a second wave of the pandemic, with many countries seeing new cases grow. Some border restrictions are being reinstated, on a targeted level though.
As some travel restrictions come back, demand for fuels is threatened, and this is likely to show in coming months, which will not be able to completely absorb the expected rise in supply.
It is interesting to see how OPEC+ itself will assess the new reality and if any new amendments of the production curtailment deal will be suggested later this month in its coming meeting.
A bullish sentiment is justified initially today, on the US stocks news, but we believe bulls may need to take shelter back at the ranch in coming days, as Covid-19 takes again the centre stage.
Together of course with OPEC+ cut tapering evidence and the soon-to-be-announced Saudi Aramco official selling prices for September."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/05082020/oil-rises-on-us-crude-stocks-news-covid-19-remains-a-concern/