Oil Demand In China And India Are Exceeding Pre-Pandemic Levels: Is The U.S. Next?

March 15, 2021 01:30 PM
OPEC+ production cuts have led to India relying on more U.S. oil imports
Iran is making demands on the Biden administration while upping the ante
The global oil market is on track to be undersupplied
Energy Report

Energy Report

The Phil Flynn Energy Report 

Coming Out of Its Shell

Crude oil prices are rising on surging Chinese oil demand, increasing geopolitical risk factors, boasts from Iran that they’ve built a "missile city,” and Reuters reports of missiles and rockets hitting fuel tankers in northern Syria, causing casualties. They’re also reporting that OPEC+ production cuts have led to India relying on more U.S. oil imports. Reuters writes that the U.S. overtook Saudi Arabia as India's 2nd largest oil supplier in February.

China's oil demand continues to support the global oil market. The demand increased 17% in January and February from the prior year, to 13.326 million barrels per day (bpd), according to data compiled by Bloomberg. That snapshot considers domestic oil-processing volume and the net import of refined petroleum. 

Bloomberg also reports that more Chinese citizens are taking to the skies, too, in a boost for jet fuel. Air passenger volume rose to 23.9 million trips in February, according to the local civil aviation administration. That’s approaching 3 times the levels reported at this time a year ago.

Both Chinese and Indian demand for oil are exceeding pre-pandemic levels, and now the U.S. gasoline demand is also recovering to near-normal levels. GasBuddy data shows that U.S. gasoline demand last week was just 0.98% below what it was during the same week last year (considered pre-pandemic). It rose 2.9%. Patrick DeHaan tweeted, “WOW!”

Iran is making demands on the Biden administration while upping the ante. Iran State Media says that the Iranian revolutionary guard is going to unveil a "missile city,” raising the risk factor in the Middle East. 

According to a Reuters report, “The United States should act quickly to revive Iran’s nuclear deal because once Iran’s presidential election period kicks off it is unlikely much will happen until later this year, Iranian Foreign Minister Javad Zarif said on Monday. Speaking at the European Policy Centre think tank, Zarif repeated Tehran’s longstanding demand that Washington returns first to compliance by lifting sanctions.”

The Biden administration said that they would consult with Congress before moving to lift sanctions on Iran.

Rising demand for oil and underinvestment has been our bullish case for the last 6 months and why this oil rally is playing out exactly as we thought. The global oil market is on track to be undersupplied. We have seen a massive pullback in investment. The break below zero in oil at the apex of the Covid-19 demand drop was a watershed event that created the consequences which will lead to a future oil shortage.  

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About the Author

Phil Flynn is a senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. Phil is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.