Crude oil is falling due to an unexpected increase in gasoline stocks, as well as Delta COVID-19 variation fears and OPEC+ producer group supply doubts, even though crude oil inventories are falling considerably faster than projected. As a result, WTI crude has dropped below $73.50. However, until the market learns more about how OPEC will bring its spare capacity into the market, neither a sharper decrease nor a large rise are probable. WTI might approach $80 if the producer group limits supply rises more than currently envisaged, according to Bart Melek, Head of Commodity Strategy at TD Securities.
“Crude oil is staying within a fairly tight range immediately after the publishing of the Petroleum Status Report, thanks to a huge 6.7 million inventory draw (vs. projected 3.85 million). Meanwhile, despite the 151K b/d increase in product demand, the latest gasoline inventory statistics suggest refiners may have jumped the gun on demand recovery, as utilization rates improved by 0.7 percent more than predicted. The recent increase in gasoline stocks (+1.5 million vs. -0.9 million predicted) suggests some stockpiling ahead of summer demand, but gasoline inventories are beginning to seem unusually bloated when compared to the 2015-2019 average. It’s also worth noting that there’s no scarcity of crude, as OPEC+ has ample spare capacity to meet demand.”
“We predict a tight supply-demand scenario in the long run, with prices challenging recent highs. If everything go as planned, we don’t rule out WTI challenging the $80/b level. Despite the Delta variant dangers, a three-million-b/d increase in worldwide demand is expected in the following three months. At the same time, OPEC+ is expected to maintain its discipline in terms of how rapidly sequestered capacity is introduced into the rising market. As a result, the resulting deficit, which will unwind all excess stocks, should be a positive in the coming months.”/n
