Market Summary: April 17, 2021

Petroleum prices recovered significantly this week as positive economic data from China, increases in monthly demand forecasts by both OPEC and the Paris-based IEA, a series of diplomatic expulsions between the US and Russia linked to both the Ukrainian issue as well as Russian tampering with the US election, increases in Iranian-backed Houthi rebel attacks on Saudi Arabia and a 9.1 MB draw in total US commercial petroleum inventories provided price support. On the week, WTI gained 6.4%, Brent 6.1%, RBOB 4% and ULSD 4.9%. Continued increases in Covid-19 cases that have doubled in the last two months according to the WHO, additional progress in the multinational discussions regarding the possible renewal of the Iranian JCPA agreement of 2015 and early signs of production increases from OPEC+ before the May 1st commencement date served to restrain price gains.

Positive employment data and ongoing concerns regarding the threat of significant inflation were key drivers in other markets. US equity indexes increased. On the week, the Dow gained 1.2%, the S&P 1.4% and the NASDAQ 1.1%. The dollar index fell to 91.54 as concerns regarding the potential oversupply of dollars continue. Gold had its best week of the year on the heels of weakening dollar, rising 2% to settle at $1,780.20 per ounce.


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Chinese officials released data showing Q1 2021 GDP growth of 18.3% on a year-on-year basis. The same data release included an increase in Crude imports of 21% over the same period of time.

The Paris-based IEA increased its projected global demand growth for 2021 by 230 KBPD to a level of 5.7 MBPD. OPEC raised its projection by 190 KBPD to a level of 5.95 MBPD for 2021. Both groups expect the vast majority of the growth to occur in the second half of 2021.

Iranian Crude production now stands at 2.35 MBPD, a two-year high as heavily discounted Crude sales to China continue to sidestep US driven sanctions. Should sanctions be eased, Iranian production is estimated to rise to more than 3.3 MBPD almost immediately with eventual increases to between 3.5 and 3.8 MBPD. Iranian backed Houthi rebels claim to have launched 17 drone strikes and two ballistic missile attacks at strategic oil targets in Saudi Arabia. Tensions have increased between Israel and Iran as recent electrical outages at Iranian nuclear development sites have been categorized as an act of Israeli sabotage. The lead Iranian negotiator in discussions in Vienna among participants to the 2015 JCPA nuclear agreement stated a “new understanding” had been reached and that an outline of restoration of the agreement should be drafted. Discussions among the participants are scheduled to resume today. The US president stated he was “pleased” with the progress of these discussions.

Both Libya and Venezuela who, along with Iran, constitute OPEC members not party to the OPEC+ agreement are expected to introduce an additional 350 KBPD of Crude supplies in the second half of 2021.

US Crude inventories fell for a third consecutive week and third week in eight, dropping by 5.890 MB. US Crude stocks are now roughly 1% over their five-year average and are 11.2 MB below levels of last year at this time. The price of WTI gained $3.81 on the week. Inventories in the three PADDs affected by trans-Atlantic trade fell by 4.393 MB. The reduction was most pronounced in PADD 3, the US Gulf Coast, where inventories fell by 6.45 MB. This reduction was largely attributable to utilization rates in the Gulf Coast rising by 3% in the last week to 86% of capacity. Inventories at the Nymex delivery point of Cushing Oklahoma gained for the third week in five, rising by 346 KB. Cushing inventories are still below their five-year average. Crude imports fell by 412 KBPD and exports fell by 850 KBPD to a level of 2.6 MBPD, the first time since March exports have fallen below the critical 3.0 MBPD level. Production increased for the third week in four, rising by 100 KBPD. Overall refinery utilization increased by 1% to 85% of capacity. This was the sixth consecutive week that utilization has risen and is now at its highest level since the original onset of the Covid-19 pandemic of last March. We expect imports to remain low, utilization to remain unchanged and exports to increase. We therefore expect Crude inventories in the US to drop by 3.0 to 3.5 MB in the week ahead.

US Gasoline inventories increased again for a fourth week in five, rising by 309 KB. Gasoline stocks are 2% below their five-year average and 27.3 MB below levels of last year at this time. The price of RBOB gained 778 points on the week. Inventories in the three PADDs affected by trans-Atlantic trade fell by 53 KB. The change was most pronounced in PADD 3, the US Gulf Coast, where inventories grew by 2.27 MB. This increase in Gulf output will address a new shortfall in Mexican Gasoline production as the 285 KBPD Minatitlan refinery will likely remain closed for 90 days after its fire of April 7th As expected, Gasoline imports fell by 458 KBPD. Shipping data indicates a steady flow of imports from Europe in the week ahead. Demand rose to its highest level since last August, increasing by 163 KBPD to a level of 8.944 MBPD. Gasoline production increased quite significantly, by 336 KBPD to a seasonal high of 9.615 MBPD. Concerns regarding sustainability of demand increases, driven by an average national price at the pump that is now over $2.86 a gallon, have arisen. Shipping data indicates a steady stream of imports in the coming week. Given higher pump prices and the end of spring holiday demand prior to summer driving season, we expect Gasoline inventories to increase by 1.5 to 2.0 MB in the coming week.

US Distillate inventories fell for the first week in five, dropping by 2.083 MB. Distillate stocks are now 4% above their five-year average and 14.5 MB above levels of last year at this time. The price of ULSD gained 881 points on the week. Inventories in the three PADDs affected by trans-Atlantic trade fell by 1.911 MB. The reduction was most pronounced in PADD 3 stocks which fell by 1.073 MB. This reduction occurred despite a small drop in exports of 18 KBPD to a level of 1.1 MBPD. Shipping data indicates an increase in exports in the week ahead of 200 KBPD. Distillate demand increased by 464 KBPD to a level of 4.128 MBPD. Given growth in industrial activity as well as emerging agricultural demand, we anticipate Distillate demand figures to increase again but by a lesser degree than this week. Accordingly, with expectations of unchanged production as well as increases in exports and demand, we expect Distillate inventories to fall in the week ahead by 2.5 to 3.0 MB.

A number of analysts expect outright prices to remain range bound in the near term. A weakening dollar and geopolitical concerns stemming from Saudi and Israeli issues with Iran may offset any potential for progress at the multinational talks with Iran in Vienna. It also appears that increasing Russian/US friction was underreported in the press. We are of the view that prices will probably increase in the near term and further expect Gasoline to remain the weakest relative value in the petroleum complex.