What Will Virus Surge Mean for Oil Demand Outlook?

What Will Virus Surge Mean for Oil Demand Outlook?
Check out this preview of what to watch this week in the oil and gas markets.

(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author.)

Last week the OPEC+ alliance of oil producers decided to stay the course with their planned gradual increase in crude output this month and next. The oil market treated the move as a bullish assessment of global oil demand, but will a surge in COVID-19 cases in some of the world’s largest economies diminish that outlook? Read on for insights on this and other developing topics in this installment of what to watch this week on the oil and gas markets.

Jon Donnel, Managing Director, B. Riley Advisory Services: Over the coming weeks, eyes will be focused on the trajectory of new COVID cases, especially in India, Brazil, and Japan. A continuation of the elevated infections would put a dent in demand expectations going forward, likely weighing on crude prices as incremental barrels OPEC+ will be added to the market over the coming months. OPEC+ expects worldwide crude stocks to reach 2.95 billion barrels by July, suggesting levels below the pre-COVID five-year average. Variance from this figure will be a good measuring stick as to whether demand growth from economies reopening can overcome impediments from localized outbreaks.

Barani Krishnan, Senior Commodities Analyst, Investing.com: The U.S. Energy Information Administration has a gift for delivering surprises. Expect some volatility in its data this week. 

Tom Seng, Director – School of Energy Economics, Policy and Commerce, University of Tulsa’s Collins College of Business: There are growing concerns over what is becoming a disastrous level of COVID cases in India. Supplies of vaccines are being sent there from other countries to help stem the spread. Meanwhile, the market will be watching for increases in refinery utilization as inventories will need to build ahead of the summer driving season, which begins at the end of next month.

Mark Le Dain, vice president of strategy with the oil and gas data firm Validere: Supply chains are exceptionally strained. You have low inventories and massive lead times across almost everything. Oil has always been used to reduce supply chain friction and we’re going to see that increasing. As companies across industries have conference calls this coming week, we will get further indications of how they are using fuels to solve this problem. Peloton (NASDAQ: PTON), for example, had mentioned previously that they are simply flying their bikes to help with the delivery backlog. People always want stuff right away and one of the few remaining levers for companies in these positions is increased fuel use to solve that problem. 

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