Oil prices await the outcome of the OPEC+ decision while trying to get a handle on the Biden administration infrastructure plan, along with strong data from China that could increase oil demand expectations.
The market awaits the OPEC+ decision that, at this point, looks like a foregone conclusion as it celebrates the reopening of the Suez Canal. Oil is retreating, as the market is looking at the reopening of the Suez Canal as some type of watershed bearish event.
Reports that the ship had been refloated and freed caused a drop in oil, but prices soon bounced back up as a larger reality sunk in. The truth is that oil and LNG product supplies will be delayed, and that won’t help a market that’s on track to be undersupplied this summer as more Covid-19 vaccinations inspire more demand.
The MV Ever Given container ship is still stuck, blocking the waterway: anywhere from 165 to 185 vessels are waiting to resume trips to their destinations. The longer it takes, the bigger the hit we may see to the global economy.
The IEA has declared that a “supercycle” in oil demand is unlikely while also admitting that the agency had underestimated demand in their last report. In fact the IEA’s had a long track record of underestimating demand.
General demand optimism has had an influence on oil, as the market expects that we’ll see oil demand come back to pre-pandemic levels quickly as the world gets vaccinated. However, now there’s a fly in the ointment.
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. 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.