Crude extends gains early Fri as gas crunch seen boosting oil demand - Sept. 24, 2021
Crude climbs to 7-week highs but Q4 optimism may be misplaced - Sept. 17, 2021
Brent vaulted over $75/barrel mid-week and was holding above that key psychological mark as we closed this report Friday evening in Singapore.
The two key categories of drivers – fundamentals as well as sentiment in the financial markets – were pushing in the same direction this week.
A second consecutive weekly slump in US oil stockpiles and the third week of a slow resumption of Gulf of Mexico oil production and Louisiana refining operations impacted by Hurricane Ida screamed “bullish”!
Meanwhile, the latest monthly data suggesting that US inflation may be levelling off, coupled with a smart rebound in retail sales in the country in August, provided additional tailwinds.
The US EIA, OPEC and the IEA released their monthly market outlook reports this week and the consensus view was that the Delta wave had only delayed, not derailed oil demand recovery.
But are we being too sanguine about Covid keeping its claws out of the global economy and oil demand resuming a steady upward climb in the upcoming northern hemisphere winter season?
Sep 2021: Neutral near-term, mildly bullish for next 3 months - Sept. 24, 2021
Crude prices are hovering around two-month highs as we write this Bulls & Bears report.
A receding global Delta wave gradually lifted crude out of the August doldrums, which had seen Brent slip-slide to $65. But some other factors – largely unanticipated – have since turbo-charged the recovery.
US offshore oil production and refining capacity impacted by Hurricane Ida, which hammered the Louisiana coast on August 29, has been slow in returning to normal operations, causing big crude and refined product draws on the country’s inventories. Coupled with a continued strong pace of demand recovery – US oil use on a four-week average basis has reached 99% of 2019 levels – it flashes a “buy” signal for crude.
Meanwhile, a snowballing gas shortage in Europe has begun pulling in some oil products as substitute fuels, adding to bullish sentiment. However, it remains to be seen to what extent the worst-case-scenario for the winter heating season pans out.
This week began with the broader financial markets in big turmoil, ahead of the US Federal Reserve meeting and wary of the repercussions of Chinese real estate giant Evergrande’s debt crisis. Fed Chairman Jay Powell managed to soothe market nerves, but the Evergrande saga is still unfolding.
Our latest Bulls & Bears report concludes
OPEC+ gets back on the horse with tapering deal into 2022 - July 19, 2021
Our quick insights on the development: