Indian oil demand in focus ahead of OPEC JMMC meeting

OPEC JMMC meets tomorrow with all eyes on India as coronavirus cases mount.

Oil trading

Oil prices started the week on the back foot, but have traded higher at the time of writing, following continued OPEC+ optimism in demand recovery.  WTI is back above $62. Brent is trading above $65 too.

Global demand is still forecast at around 6m bpd for 2021. The surplus built up throughout the pandemic is expected to be gone by the end of Q2 too. All good news, but we’re not out of the woods yet. OPEC+ has raised concerns over the situation in India.

Indian Covid cases are soaring again. 350,000 were reported on Monday 26^th May, putting pressure on the Indian government to lockdown again. As India is the world’s third-largest crude importer, importing 4m bpd at peak, its current conditions point towards slower recovery.

Japan’s Covid cases are being carefully monitored from an oil perspective too. In the world’s fourth largest oil importer, cases have started to flare up again. Vaccine rollout there has been slower than expected.

Even so, we’re not anticipating any alteration to OPEC+’s recovery roadmap. Crude output is likely to increase in line with tapering agreements established at the general meeting earlier in the month. A further 2m bpd is being added back to production quotas between May and June.

Turning to US storage data, commercial crude oil inventories grew by 0.6 million barrels from the previous week, according to the EIA’s most recent report. At 493.0 million barrels, crude oil inventories are about 1% above the five-year average for this time of year.

However, gasoline stocks have fallen 3% below the five-year average for the first time in 2021, which could suggest more mobility for US citizens, and this higher demand for petroleum products moving forward.

Natural gas trading

Can you feel that tantalising hint of spring in the air?

Natural gas weather forecasters can. A “perfect weather pattern” is about to hit the US’ key demand areas. Colder temperatures are giving way to Spring warmth, ending heating degree day season. Cooling degree days are on their way, which is likely to play into lower demand from here on out.

Last Thursday’s EIA Natural Gas storage report stated rose by 38 Bcf for the week ended April 16, roughly matching S&P Global Platt’s 37 Bcf forecast by analysts increase.

Total stocks now stand at 1.883 trillion cubic feet, down 251 Bcf from a year ago but 12 Bcf above the five-year average.

More US LNG output could be on its way. Rystad Energy predicts record US natural gas production in 2022, at 93.3 Bcf annually. The figure may rise to 100 Bcf by 2024. Key gas basins may attract significant investment as a result.

Total US LNG output reached a record in 2019, at 92.1 Bcfd. Production declined in 2020 to 90.8 Bcfd thanks to the Covid-19 pandemic. Volumes may fall even further this year, down to 89.7 Bcfd, but that could reverse quickly once the pandemic subsides and activity picks up in US gas producing regions.