The Commodities Feed: The US CPI drives up oil prices

The Commodities Feed: The US CPI drives up oil prices

Yesterday, oil prices rose drastically. ICE Brent ended the day more than 2% higher than when it started. As a result, pushing prices beyond US$87 per barrel. While this was happening, NYMEX WTI was able to trade at its highest levels of the year. Both the month-over-month and year-over-year statistics for the US CPI came in slightly below market forecasts, which was encouraging.

In light of the statistics, our US economist predicts that the Federal Reserve will increase rates by another 25 basis points. Experts predict the increase to take place in May before lowering toward the end of the year. The US energy secretary’s remarks would have given the market even more support. According to Jennifer Granholm, if it benefits taxpayers, the US administration may start replenishing the US Special Petroleum Reserve this year. It is doubtful that the replenishment will occur this year because we experience increased pricing throughout the year.

The time spreads for both Brent and WTI oil prices have grown stronger, along with the flat pricing. The market will be even tighter than anticipated as a result of the recently announced OPEC+ cuts, which raises the possibility of more strength in time spreads later in the year. Although the market is currently tightening, there are still concerns about demand. The refinery margins are clearly declining. Therefore, the middle distillates decrease seems to be the primary cause.

The Brent/Dubai spread has also shrunk as a result of supply reductions by OPEC+. On the back of expectations of a significant Asian demand recovery following China’s reopening, this spread has been drifting lower for the majority of the year. Dubai will continue to benefit from OPEC+’s reduction, which will primarily come from Middle Eastern producers in relation to Brent.

Energy: US crude oil stocks increased

The market mostly ignored the EIA weekly inventory data in favor of the US CPI. US commercial crude oil inventories rose by 597Mbbls over the course of the week. On the other hand, Cushing crude stocks declined by 409Mbbls. In the meantime, stockpiles of gasoline and distillate fuel oil decreased by 330Mbbls and 606Mbbls.

According to the trade data released by China this morning, crude oil imports in March increased sharply to 12.37MMbbls/d, up from 10.66MMbbls/d in February and the highest level since June 2020. The highest monthly import flows since January 2020, coal imports increased by 41% MoM to 41.17 mt. Strong import flows are probably a result of anticipations of a domestic demand rebound.

OPEC will present its most recent monthly report on the oil market today. The group’s potential revisions to demand after many members recently announced the market would closely watch supply cuts. OPEC predicted last month that in 2023, the world’s oil demand would increase by 2.32MMbbls/d.