Oil futures: Brent bounces back above $71/b after EIA report

11 Aug 2021

Quantum Commodity Intelligence - Brent recovered lost ground after the release of a mixed bag US weekly oil report Wednesday, with bullish data on propane and gasoline and neutral or bearish data for crude and distillates.

Front-month October ICE Brent futures were trading at $71.45/barrel (1745 GMT) compared to Tuesday’s settle of $70.63/b and still more than 10% down from its multi-year high of $77.83/b reached last month.

At the same time, September NYMEX WTI was trading $69.33/b, versus Tuesday’s settle of $68.29/b.

Propane prices jumped higher after the US Energy Information Administration revealed a 600,000 barrel draw in stocks over the week to August 6 at a time when the market is usually building inventories ahead of the winter.

Gasoline stocks also fell 1.4 million barrels over the week despite refiners increasing run rates and a drop in implied demand.

But crude stocks were little changed, down just 400,000 barrels over the week, and distillate stocks built 1.8 million barrels.

Earlier, Brent prices dropped to below $69.30/b after a report said the White House will call on the OPEC+ group to boost oil production amid concerns on the impact of US gasoline prices on family budgets.

Officials from the Biden Administration spoke with representatives from OPEC’s de facto leader Saudi Arabia this week, as well as with representatives from the United Arab Emirates and other OPEC+ members, CNBC reported.

The White House said the group’s July agreement to boost production by 400,000 barrels per day on a monthly basis beginning in August and stretching into 2022 is “simply not enough” during a “critical moment in the global recovery.”

US gasoline pump prices stood at $3.186 per gallon on average on Tuesday, up from $3.143 a month ago and up roughly $1 over the last year, according to the American Automobile Association.

“The president recognizes that gas prices can put a pinch on the family budget,” a senior White House official said, according to CNBC

“He’d like his administration to use whatever tools that it has to help address the cost of gas, to help bring those prices down.”

Gasoline demand

US gasoline demand has surprised to the upside, helping to nudge the forecast for US oil demand this year to 19.7 million bpd, up 1.58 million bpd on last year, and a slight improvement on the 1.52 million bpd growth expected in July.

“Our latest estimates show that gasoline consumption in May through July was higher than we had previously expected. Growth in employment and increasing mobility have led to rising gasoline consumption so far in 2021,” the EIA said.

Meanwhile, data from the American Petroleum Institute showed US crude inventories fell by 816,00 barrels and gasoline stocks fell by 1.1 million barrels in the week ended Aug. 6.

London-based Eagle Commodities Brokers commented; “the triggers which drove crude lower (Monday) have not ebbed today. In fact, reports have emerged that Sinopec is aggressively cutting run rates at some of its refineries to brace for lower domestic demand.”

China reported just 111 new cases of COVID-19 on the mainland for Tuesday (Aug 10), down from 143 cases a day earlier, but travels restrictions remain across large swathes of the country.

Goldman Sachs said Chinese oil demand will slump by around 1 million bpd for the next two months as a result of the zero Covid policy and mobility restrictions, but the bank has largely maintained its bullish price outlook.

“While we had already lowered our emerging market demand expectations due to the Delta variant last month, we had omitted China, where we are now cutting our demand forecast by 1 million bpd over the next two months, double the estimated impact so far.”

However, Goldman maintained its $80/b Q4 forecast due to tight supplies.