Singapore — 0250 GMT: Crude oil futures rose during Asian mid-morning trade April 1 after data from the US Energy Information Administration showed a draw in crude and gasoline inventories, with the market gleaning further support from expectations that OPEC+ will roll over its production quotas into May.
At 10:50 am Singapore time (0250 GMT), the ICE Brent June contract was up 9 cents/b (0.14%) from the March 31 settle at $62.83/b, while the May NYMEX light sweet crude contract rose 34 cents/b (0.57%) to $59.50/b.
The EIA data, released on March 30, showed that US commercial crude inventories had fallen 880,000 barrels in the week ended March 26 to 501.84 million barrels. The draw in inventories came as total net crude input climbed 3.8% to 14.94 million b/d, the highest since the week ended March 20, 2020, and as refinery utilization reached 83.9% of total capacity, up 2.3 percentage points from the week prior.
The draw in crude inventories boosted sentiment as it was contrary to market expectations. Analysts surveyed by S&P Global Platts earlier had expected a 200,000-barrel build instead.
The market received another boost as the EIA data showed that US gasoline inventories had declined 1.74 million barrels to 230.54 million barrels, while gasoline product supplied, the EIA’s proxy for demand, rose 3.2% to 8.89 million b/d, the highest since the week ended Oct. 2, 2020. The increase in gasoline demand comes as US driving activity climbed 3.3% last week to its highest since the week ended Sept. 18, 2020, Apple Mobility data showed.
Only distillate inventories registered a build, increasing counter-seasonally by 2.54 million barrels to 144.1 million barrels. Nevertheless, the market can take solace in the statistic for overall refined product demand, which jumped 8.6% to 20.31 million b/d last week.
The largely bullish EIA report was still a cause of concern to market analysts, however, with Edward Moya, senior market analyst at Oanda, saying in an April 1 note that, with the data showing that US production has surged to over 11 million b/d, there could be some concern among OPEC+ members that they may lose market share to the US.
“The EIA crude oil inventory left me with mixed feelings,” he said, against the backdrop of the upcoming April 1 OPEC+ meeting, during which the coalition is expected to decide on its production plan for May.
Market analysts expect OPEC+ to keep production steady, as the global economy is still feeling the effects of the coronavirus pandemic, and as sell-offs in the market during the second half of March have highlighted the frailty of crude’s recovery.
ANZ analysts said in an April 1 note that the escalation of the pandemic in Europe particularly has led to significant demand-side uncertainty, and this could tilt the OPEC+ into extending most of its supply cuts.
“Yesterday France announced it was entering another four-week lockdown, while Italy extended virus restrictions. This has delayed the recovery in demand, and kept the physical market over-supplied,” they said.
