Quarterly update on Global Crude Oil Market
For the Quarter Ending June 2021
Restored industrial activities in the US Gulf Coast improved the Crude Oil market outlook in the North American region. Restart of several refineries and crackers surged the consumption of Crude Oil. As a result, the U.S. Crude Oil stockpiles continued to fall due to the continuous consumption and increased refiners operating rates. The regional Crude Oil supplies were dented by the cyber-attack in the colonial pipeline in second quarter of 2021. Inventory drawdowns further added to the supply side pressure despite hovering demand uncertainties form the Asian economies due to the resurgence of the pandemic. Amidst increased industrial activities and better volume offtakes, WTI Crude Oil prices continued to strengthen in Q2, with the offers observing a multi fold surge on m-o-m basis. WTI Crude oil was assessed at USD 70.04 per barrel in June with a hike of USD 8.46 per barrel over May.
During the second quarter of 2021, Crude Oil supplies in the Asia Pacific region were balanced with demand outlook uncertain due to surge in COVID related complications in India which further restricted the public movement and limited the industrial activities for a larger part of the second quarter. Whereas China reported surge in Brent Crude offtakes from Iran. Asia’s Crude demand surged in June as the mass vaccination programmes eased the restrictions in several parts of the region and the market sentiments continued to strengthen. As a ripple effect, the Crude Oil price trend in India observed continuous gains after gradual downfall in April. Price of Brent Crude reached USD 71.23 per barrel in June, showing an increment of USD 9.53 per barrel within the second quarter of 2021.
The supply outlook of Crude Oil in the European region improved in the second quarter of 2021, owing to the restart of several producers in the Middle East. However, shipments to Asia and the Middle East were hindered during the quarter starting. Further amelioration in the arbitrage conditions with USA, proportionally increased the import volumes as the shipping rates dropped in the western region. Demand outlook was bolstered as the regional offtakes increased amid the restart of several crackers and refineries along with the better downstream production rates. Mass vaccination programme and surged market activities supported the demand of Crude Oil. Europe Brent Crude spot prices in June were assessed at USD 73.16 per barrel.
For the Quarter Ending March 2021
Crude Oil market in the North American region experienced the severe downfall in supplies as extreme freeze weather conditions in Texas and nearby of US Gulf coast area, resulting in regional production cuts by the Crude Oil extractors. The demand showed mixed sentiments due to the shutdown of major US Gulf Coast based refineries including those of Dow Chemicals, ExxonMobil, and force majeures on various downstream petrochemical units in mid-February. Motiva Enterprises announced to shut its 607,000 bpd Port Arthur, Texas, refinery, the largest in the United States after Valero Energy Corp and Total SE declared to shut their 335,000 and 225,000 bpd plants in Texas, due to the cold snap. Colonial Pipeline Co, the largest oil products pipeline in the US, reported no significant impact due to storm in its operations. Storm effects stalled energy distribution hampered sending ripples to the price. WTI Crude jumped to USD 66 per barrel on 11th March, to its several months high in a single day.
The crude oil market remained resolutely high in the APAC region, amidst major consumers seeking more barrels with the demand turning robust as various downstream industries restarted again after a turnaround. Refiners maintained their key focus on the Chinese and Indian spot demand as operations ramp up turning fuel demand high. Indian Oil Corp. (IOCL) issued a tender in mid-March seeking sweet crude from West Africa and other regions while China's Rongsheng closed a buy tender for purchase of nearly 3 million barrels of crude from Oman, Murban crude and Upper Zakum in mid-March. Crude futures rose as OPEC+ supplies remained tight with demand expected to increase as global economic activity picks up.
The European Crude oil futures dwindled as the demand slumped with slowed market sentiments and other restricted economic activities throughout the region. The refiners seemed uncertain with renewed lockdown restrictions in Europe and affected supplies as winter storm hit several parts of the southern United States in February. Nearly all petroleum inventories for crude and related products have increased in March, with a massive change reported from January and February. Several suppliers were heard struggling to find buyers with storage tanks sufficiently stocked as fresh COVID wave restrained movement and regional energy demand.
For the quarter ending December 2020
Crude oil market in Asian countries experienced a fair growth in the final quarter of 2020 as the effect of pandemic slowed down. Nation wise lockdown in major countries created a devastating situation for crude oil sector. In October most of the Asian countries like India and China considerably revived from the effects of Covid19 and opened their economies again. Moving to November the petroleum sector rebounded effectively by a promising number of around 10% and thus at the end of the fourth quarter demand came close to the normal conditions. The demand is likely to witness a further boom in first quarter of 2021 as the aviation sector is on the road to utilize its full capacity. Aviation sector rebounded at around 13% per month (in India) in the final quarter of 2020, after suffering from an immense drop in the first half of the year. Thus, on the last day of 2020, OPEC daily basket prices of Brent Crude climbed to USD 51.80 barrel while US West Texas Crude reached USD 48.52 a barrel.
Backed by the presence of various players, North America maintains a huge crude oil production capacity. In the final quarter of 2020, production rates remained similar to pre Covid-19 levels however the demand was still facing setbacks due to slowed rebound in some of the downstream industries. Contrary to the expectations, in October crude oil prices dropped further 4% in USA. Fall in prices affected most of the oil producing companies and thousands of people lost their jobs. Although Storm Zeta in the Gulf of Mexico temporarily eased the fall in its prices due to the forced measured declared on several production facilities of that region. Number of rigs in USA increased by the end of the quarter but USA as well as Canada was heard looking forward to slow down the crude oil production in upcoming years just to reduce their carbon emission.
Last quarter of 2020 was not good for some middle east countries, they faced huge financial crises due to consistent fall in crude oil prices. In addition, OPEC imposed an oil production quota on its member countries to limit the production of crude oil. The quota made the situation worst for countries like Iraq as their economies are majorly dependent on Crude oil production. However, Kurdistan, an independent oil producing country based in Middle East was heard taking advantage of OPEC’s mandate and thus catered enhanced revenue over its commodity peers bound under OPEC. Market sentiments turned optimistic in the end of fourth quarter of 2020, when OPEC gave hopes to ease the strict mandate from January.