DTN Oil

NYMEX RBOB at 23-Mo High as Traders Eye Demand Recovery

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Crude and refined products futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange were mixed in early trade Friday, with the nearby month RBOB contract trading at a 23-month high as traders bet on a rapid recovery in U.S. fuel demand this summer driven in large part by the reopening of large gasoline consuming states and additional stimulus measures, which President Joe Biden signed into law on Thursday.

Near 7:30 a.m ET, West Texas Intermediate for April delivery slipped just below $66 per barrel (bbl) and Brent May crude traded little changed near $69.45 bbl. NYMEX April ULSD futures gained 0.3 cents to $1.9624 gallon and front-month RBOB futures added 0.4 cents to trade near $2.1420 gallon after surging nearly 6 cents in the previous session.

The mix of stimulus funds and a quickened pace in state re-openings joined an improving employment picture, with jobless claims during the first week of March at the lowest level since the pandemic took hold in the United States at 712,000, boosting the outlook for driving demand. The gasoline contract traded just below the 2019 high on the spot continuous chart at $2.1513 gallon overnight.

Another key measurement for driving demand will be released later Friday morning, with the University of Michigan's preliminary Consumer Sentiment Index for March expected to show an improvement to multi-month high reading of 78.5. Improving consumer sentiment could also lend support to the U.S. dollar, which reversed most of Thursday's losses in early trading, up 0.397 to 91.815 in early index trading.

Friday's main headline follows Biden's address to the nation Thursday night in which he aims for all Americans to be eligible for COVID-19 vaccination on May 1. The U.S. daily inoculation rate now exceeds 2.2 million doses, with 98.2 million doses having been administered since the vaccination campaign began late last year. Biden set a July 4 goal for the United States to begin returning back to normal, improving the country's economic outlook.

Data released Wednesday by the Energy Information Administration shows a recovery is underway, with U.S. gasoline demand jumping 578,000 barrels per day (bpd) in the first week of March to a four-month high 8.726 million bpd, a 7% increase from the previous week. Distillate demand during the week rose by about 700,000 bpd, and at 4.487 million bpd, is now higher than levels seen this time last year.

Further supporting the complex, Organization of the Petroleum Exporting Countries revised higher its global oil demand projection for 2021 to 96.27 million bpd, reflecting an annualized growth rate of 5.89 million bpd. Upward revisions to its demand outlook were made for the third and fourth quarters, with OPEC citing this week's $1.9 trillion fiscal stimulus package, as one of the reasons behind the adjustments. The cartel, however, lowered its oil demand forecast for first and second quarters by 180,000 bpd and 310,000 bpd, respectively.

"Oil requirements in H1 2021 are adjusted lower, mainly due to extended measures to control COVID-19 in many key parts of Europe. In addition, elevated unemployment rates in the US slowed the recovery process," OPEC said Thursday.

Several European countries this week suspended the use of Oxford's AstraZeneca vaccine. Denmark, Norway, and Italy announced Thursday they would halt the rollout of the AstraZeneca vaccine due to concerns that some patients have developed blood clots after inoculations. Health authorities insist the vaccine is safe.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges