Oil Pulls Back As Traders Wait For Additional CatalystsOil managed to get below the $53 level and is trying to settle below the support at $52.70.
Oil Video 14.01.21.
EIA Decreases Its Oil Demand Forecast
EIA has recently published its January Short-Term Energy Outlook and forecasted that global oil consumption will reach an average of 97.8 million barrels per day (bpd) in 2021. The previous forecast implied that consumption would total 98 million bpd.
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EIA noted that the forecast was dependent on the success of the mass vaccination program in the world. Mass vaccination did not start smoothly in developed countries while many developing countries have yet to receive vaccines so the risks are shifted to the downside.
The negative impact of the current virus containment measures in Europe is yet be seen. At this point, it looks like European countries will have to implement various measures for the full first quarter, but Saudi Arabia’s production cut should be able to provide enough support for the market during this period.
Interestingly, EIA expects that Brent oil price will average $53 in 2021 while WTI oil will trade at a discount of $3 to Brent. Currently, the front-month WTI contract trades firmly above the $52 level although longer-dated contracts trade closer to the $50 level which is in line with EIA expectations.
It remains to be seen whether traders will focus on such predictions or bet on the continuation of the current rally which is fueled by Saudi Arabia’s production cut and declining inventories.
Demand For Gasoline Remains Soft At The Beginning Of The Year
According to EIA data, gasoline demand increased from 7.44 million bpd in the previous week to 7.53 million bpd. A year ago, gasoline demand stood at 8.56 million bpd so current demand is about 1 million bpd lower compared to previous year’s levels.
In the upcoming trading sessions, the market will likely focus on Biden’s stimulus plan which may provide additional support to gasoline demand. If the gap between current demand and pre-pandemic demand starts to decrease, oil may get additional support.
At the same time, the recent Initial Jobless Claims report suggested that the job market was under strong pressure from the second wave of the virus which may serve as a negative factor for demand in the near term.
For a look at all of today’s economic events, check out our economic calendar.