Oil prices remained steady week over week despite a significant build in U.S. crude inventories two weeks ago, which was countered by a decline in U.S. crude inventories for the week ending April 19 . At the same time, traders are less worried about a possible supply disruption in the Middle East.
The build-up of crude stocks in the middle of the month raised fears of a weakening in oil demand; However, Standard Chartered estimates that global stocks will increase by only 74,000 barrels per day in April, a much smaller increase compared to the 2.2 million barrels per day (mb/d) accumulated in April 2023. and the increase of 1.4 mb/d in April. April 2022. StanChart notes that markets could be more sensitive to this change in trajectory following strong counter-seasonal destocking during the first quarter of 2024.
Better yet for bulls, StanChart forecasts global oil demand to rise sharply in May and June, surpassing 103 mb/d for the first time in May (to 103.15 mb/d), increasing further in June to 103.82 mb/d. .
Commodity experts forecast global inventory draws of 1.53 mb/d in May and 1.69 mb/d in June, significantly tightening physical spreads. StanChart also says OPEC is unlikely to increase production in the near term due to the stalled rise in oil prices, although it has room for at least 1 mb/d of additional production of OPEC in the third quarter without increasing stocks.
With just six weeks until the next key ministerial meeting, concerns over demand and the macroeconomic environment are expected to dominate the meeting. StanChart says we will likely see an inventory drawdown of 1.6 mb/d in the third quarter if there is no increase in OPEC production, worsening the price effect of a drawdown of 1.1 mb/d in the first half of 2024.
US sanctions against Iranian oil
Recently, the Biden administration adopted new sanctions against Iran’s oil sector as part of the $95 billion foreign aid package to Ukraine, Israel and Taiwan. In a bid to reduce Iranian oil trade with China, the expanded sanctions now target Chinese banks that conduct transactions involving Iranian crude and products. Sanctions now target foreign refineries, ships and ports that knowingly process, transfer or ship crude oil in violation of existing sanctions. The new sanctions could prove significant and disrupt market fundamentals, given that Iran currently produces around 3 million b/d and is expected to increase production by another 280,000 b/d this year.
StanChart predicted that while the upcoming US presidential election could influence the timing of the next drop in Iranian exports, Iranian oil flows are bound to take a hit regardless of who ascends to the Oval Office in 2025. Analysts note that current US policy These instruments were enough to bring Iranian exports back to near zero at the end of 2020, before the international context and associated implementation policies changed. StanChart argued that the Biden administration had the option to begin implementing the sanctions immediately despite the risk of fuel price increases in an election year. StanChart notes that the record on the day of a US presidential election is $3.492/gal in 2012 (when the
the incumbent won), which equates to about $4.80/gal in 2024 money terms after adjusting for consumer inflation. That’s $1.14/gal more than current prices, with the average U.S. gasoline price being $3.66 per gallon. StanChart argues that while recent U.S. international oil policy has clearly been designed with the goal of moderating the effects on oil prices, this does not mean that the United States has necessarily chosen a policy of minimal pressure on oil prices. Iranian and Russian oil exports.
Meanwhile, the outlook for natural gas appears to be getting more optimistic. A late cold spell led to a sharp deceleration in European gas stockpiling, with EU stocks standing at 72.01 billion cubic meters (bcm) on April 21, according to data from Gas Infrastructure Europe (GIE). The w/w growth was just 0.427 Bcm, significantly slower than the 2.005 Bcm build for the week to April 14. StanChart estimates, however, that the cold snap may not last long, meaning Europe will likely still face a gas glut this summer. The U.S. gas outlook, however, is more optimistic after National Weather Service (NWS) meteorologists forecast above-average summer heat across the vast majority of the country, paving the way for increased demand for cooling.
By Alex Kimani for Oilprice.com
More important reading on Oilprice.com:
Oil prices remained steady week over week despite a significant build in U.S. crude inventories two weeks ago, which was countered by a decline in U.S. crude inventories for the week ending April 19 . At the same time, traders are less worried about a possible supply disruption in the Middle East.
The build-up of crude stocks in the middle of the month raised fears of a weakening in oil demand; However, Standard Chartered estimates that global stocks will increase by only 74,000 barrels per day in April, a much smaller increase compared to the 2.2 million barrels per day (mb/d) accumulated in April 2023. and the increase of 1.4 mb/d in April. April 2022. StanChart notes that markets could be more sensitive to this change in trajectory following strong counter-seasonal destocking during the first quarter of 2024.
Better yet for bulls, StanChart forecasts global oil demand to rise sharply in May and June, surpassing 103 mb/d for the first time in May (to 103.15 mb/d), increasing further in June to 103.82 mb/d. .
Commodity experts forecast global inventory draws of 1.53 mb/d in May and 1.69 mb/d in June, significantly tightening physical spreads. StanChart also says OPEC is unlikely to increase production in the near term due to the stalled rise in oil prices, although it has room for at least 1 mb/d of additional production of OPEC in the third quarter without increasing stocks.
With just six weeks until the next key ministerial meeting, concerns over demand and the macroeconomic environment are expected to dominate the meeting. StanChart says we will likely see an inventory drawdown of 1.6 mb/d in the third quarter if there is no increase in OPEC production, worsening the price effect of a drawdown of 1.1 mb/d in the first half of 2024.
US sanctions against Iranian oil
Recently, the Biden administration adopted new sanctions against Iran’s oil sector as part of the $95 billion foreign aid package to Ukraine, Israel and Taiwan. In a bid to reduce Iranian oil trade with China, the expanded sanctions now target Chinese banks that conduct transactions involving Iranian crude and products. Sanctions now target foreign refineries, ships and ports that knowingly process, transfer or ship crude oil in violation of existing sanctions. The new sanctions could prove significant and disrupt market fundamentals, given that Iran currently produces around 3 million b/d and is expected to increase production by another 280,000 b/d this year.
StanChart predicted that while the upcoming US presidential election could influence the timing of the next drop in Iranian exports, Iranian oil flows are bound to take a hit regardless of who ascends to the Oval Office in 2025. Analysts note that current US policy These instruments were enough to bring Iranian exports back to near zero at the end of 2020, before the international context and associated implementation policies changed. StanChart argued that the Biden administration had the option to begin implementing the sanctions immediately despite the risk of fuel price increases in an election year. StanChart notes that the record on the day of a US presidential election is $3.492/gal in 2012 (when the
the incumbent won), which equates to about $4.80/gal in 2024 money terms after adjusting for consumer inflation. That’s $1.14/gal more than current prices, with the average U.S. gasoline price being $3.66 per gallon. StanChart argues that while recent U.S. international oil policy has clearly been designed with the goal of moderating the effects on oil prices, this does not mean that the United States has necessarily chosen a policy of minimal pressure on oil prices. Iranian and Russian oil exports.
Meanwhile, the outlook for natural gas appears to be getting more optimistic. A late cold spell led to a sharp deceleration in European gas stockpiling, with EU stocks standing at 72.01 billion cubic meters (bcm) on April 21, according to data from Gas Infrastructure Europe (GIE). The w/w growth was just 0.427 Bcm, significantly slower than the 2.005 Bcm build for the week to April 14. StanChart estimates, however, that the cold snap may not last long, meaning Europe will likely still face a gas glut this summer. The U.S. gas outlook, however, is more optimistic after National Weather Service (NWS) meteorologists forecast above-average summer heat across the vast majority of the country, paving the way for increased demand for cooling.
By Alex Kimani for Oilprice.com
More important reading on Oilprice.com: