Oil Mixed At The End Of The YearOil continues to consolidate near the $48 level.
Oil Video 31.12.20.
Gasoline Demand Continues To Move Higher
According to EIA, U.S. gasoline demand increased from 8.02 million barrels per day (bpd) to 8.13 million bpd. A year ago, gasoline demand stood at 8.96 million bpd. Importantly, gasoline demand was trending down at this time of the year in 2019 while it is slowly moving up in 2020.
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The gap between current gasoline consumption and last year’s levels is closing. A week ago, this gap was almost 1.3 million bpd while it declined to 0.83 million bpd this week.
It remains to be seen whether this trend will be sustainable but it is good news for the market. If gasoline demand continues to increase, inventories will move lower which will be bullish for oil prices.
As oil is located close to the psychologically important $50 level, the market may need just one material upside catalyst to get to higher levels, and rising gasoline demand may serve as such a catalyst.
At the same time, it’s too early to get very excited as the virus situation remains challenging and the recent uptick in gasoline demand may be due to holiday-related travel from people who avoided any forms of mass transportation.
U.S. Oil Producers Keep Putting More Rigs To Work
The recent Baker Hughes Rig Count report indicated that the number of U.S. rigs drilling for oil has once again increased by 3 to 267. Interestingly, the U.S. domestic oil production remains unchanged at 11 million bpd which is a comfortable level for the market.
At this point, it looks like OPEC+ will be the main source of production increases in the upcoming months while U.S. oil production will stay near current levels.
On January 4, OPEC+ will meet to discuss the current state of the market. According to recent reports, Russia will push for another production increase of 500,000 bpd in February.
It is not clear whether such a move will put any serious pressure on the market as traders remain focused on longer-term outlook. At the same time, the situation with the virus in Europe remains challenging, and European oil demand may be even worse than expected in the first quarter of 2021 which may put some pressure on oil prices.
For a look at all of today’s economic events, check out our economic calendar.