Oil prices rocketed higher yesterday following a bullish EIA report and supportive commentary from the International Energy Agency. Crude oil gained $3/bbl, while fuel prices picked up solid 6-7 cent gains. This morning, markets are slowing down a bit, trading in line with yesterday’s closing price.
The EIA’s weekly inventory report provided a lift for the market, with a headline crude draw of nearly 6 million barrels. Diesel stocks fell as well, and gasoline’s build was far smaller than expected. Both gasoline and diesel demand moved higher; gasoline pushed close to 9 MMbpd and diesel moved above 4 MMbpd, both in line with pre-COVID seasonal averages. Strong demand and accompanying inventory draws provided a glimmer of hope that this summer could bring normal-ish fuel trends. Refinery utilization reached 85% this past week, touching the lower-end of normal seasonal throughput.
The IEA raised its oil demand growth expectations for this year by 230 kbpd, bringing total growth to 5.7 MMbpd over 2020 levels. Although that’s only 2/3 of the demand lost during the pandemic, cuts from OPEC+ and other countries have compensated for the rest. Beyond adding support to global markets, increased demand also instills confidence that the world can absorb supply increases if Iran sanctions are lifted later this year.
