ICE Brent rallied by almost 1.6% yesterday with the US carrying out further airstrikes against the Houthis in Yemen, while the market would have also been supported by the strength in equity markets.
However, the IEA latest monthly oil market report was somewhat bearish. The agency forecasts that global oil demand growth will slow to 1.2m b/d in 2024 from 2.3m b/d in 2023. This is partly driven by the post-COVID demand recovery now largely behind us, while GDP growth this year is also expected to be below trend for most major economies. The IEA expects global oil supply to grow by 1.5m b/d in 2024, almost entirely due to non-OPEC+ production. OPEC+ production is expected to be largely unchanged, although much will depend on OPEC+ policy for the remainder of the year. The IEA sees a substantial surplus in the oil market if OPEC+ unwind their current voluntary cuts in 2Q24.
The EIA’s weekly inventory report shows that US commercial crude oil inventories fell by 2.49m barrels over the last week with crude oil exports rising by 1.71m b/d. Refined products saw stocks rising. Gasoline and distillate inventories grew by 3.08m barrels and 2.37m barrels respectively. Next week’s release will cover a period in which there were several disruptions due to the freezing weather conditions across large parts of the US. Crude oil output will likely fall given the outages we have seen in North Dakota, while refinery activity is set to drop as freezing conditions pushed refiners in the Gulf Coast to reduce run rates. There are estimates that around 15% of refining capacity in the US Gulf Coast has been hit due to the colder weather.