Oil prices saw a record rally in the week gone by, posting the biggest weekly gain since early March after experiencing a downward trend for weeks as investors cheered impressive data from China and the US, giving a boost to chances of a quick economic recovery.

The International Energy Agency joined the world’s major oil organisations in boosting its consumption forecasts earlier last week, with the IEA citing the improving situation in the US and China. Furthermore, the dollar slid to a four-week low supporting prices after the sharp drop in treasury yields, as investors increasingly accepted the Federal Reserve’s vow to keep an accommodative policy stance for longer than expected.

The other encouraging data was US inventories by EIA, which showed US crude stockpiles dropped 5.899 million barrels (MB) compared with expectations for a draw of 2.889 MB. Gasoline inventories rose 3,09,000 barrels, compared with expectations for a 7,86,000-barrel build. Distillate stockpiles dropped 2.083 MB against expectations for a build of 9,71,000 barrels.

Reports indicate that Chinese refineries are back in business with heightened activity, while the regular maintenance phase is slowly coming to an end, which means more demand for crude in the coming months.

In Asia, a Chinese mega-refiner and some Japanese oil companies have been snapping up crude cargoes, boding well for the physical market. However, in Asia and Europe, there are still serious concerns about the resurgence of the number of infections. The slow pace of vaccine rollout hasn’t helped calm investors.

Diesel will also provide support, mostly based on economic improvements stemming from the implementation of the fiscal stimulus programme. The easing of restrictions and increased demand expected in the summer driving season should lift global gasoline requirements further.

Despite projections showing a marked improvement in gasoline demand compared to 2020, consumption in the summer months is still not expected to surpass 2019 levels due to COVID-19 related challenges. Global gasoline demand is estimated at 24.0 million barrels per day (mb/d) in Q1CY21, forecast at 25.6 mb/d in Q2CY21, 26.7 mb/d in Q3CY21 and 25.4 mb/d in Q4CY21. IEA raised this week its 2021 global oil demand forecast by 2,30,000 Bpd to 5.7 Mbpd.

Natural gas

Natural gas prices moved higher as weather is expected to be cooler than normal for most of the midwest for the next six days and then moderate. EIA showed that inventories increased 61 Bcf lower than forecast for a build of 65 Bcf addition but it surpassed the five-year average build of 26 Bcf. A combination of increased heating demand, record liquefied natural gas and pipeline exports, and decreased natural gas production contributed to the withdrawal activity during February.


Oil markets are making way for a volatile week and it looks like it will be a very noisy week indeed. With the recent OPEC production increases announced, that could be bearish for this market, but on the other hand you have people hoping for the reflation trade to drive up demand. All in all, it looks like markets have to live with the pandemic for another year until it naturally dies down despite the speed of the vaccine rollout and its success; this is what happened with the pandemic of the Spanish flu in 1918 that lasted two years—despite the absence of such a vaccine rollout at that time. The outlook in oil markets remains clouded by uncertainty about speedy crude oil demand recovery.