WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange continued lower in early trade Wednesday after International Energy Agency projected global oil demand is unlikely to recover to its pre-pandemic levels until at least 2023 due to slow vaccine rollout campaigns in the European Union and some developing countries, leading to glutted global oil inventories despite steeper-than-expected production cuts from Organization of the Petroleum Exporting Countries.
"There is more than enough oil in the tanks and under the ground to keep global oil market adequately supplied," said IEA in its Medium-term Oil Market Report released Wednesday morning.
The Paris-based energy watchdog also warned that talk of a "super-cycle" in oil markets in which demand and prices strongly advance over an extended period of time is overdone, as vaccination campaigns in some major oil consuming nations are lagging far behind intended targets, meaning global oil demand is unlikely to reach its pre-crisis levels any time soon.
Global oil consumption this year is expected to recover just 60% of what was lost in 2020 following a 2019 demand rate at 99.7 million barrels per day (bpd), growing 5.5 million bpd to 96.5 million bpd due to the protracted pandemic. Germany, France, and Thailand are the latest countries to have suspended the use of the AstraZeneca vaccine this week amid concerns over associated health risk despite assurances from the World Health Organization that the vaccine is safe.
The rebalancing of the oil market remains fragile in the early part of 2021 as measures to contain the spread of COVID-19, with its more contagious variants, weigh heavily on the near-term recovery in global oil demand. Fresh price support, however, has been provided by a more positive economic outlook in the United States for the second half of the year, along with a pledge from OPEC along with Russia-led partners to continue to restrain production to induce the drawdown of surplus oil inventories.
Domestically, data from American Petroleum Institute released late Tuesday showed domestic crude oil inventories unexpectedly fell 1 million barrels (bbl) during the week-ended March 12 compared with analyst expectations for a 1.4 million bbl build. Domestic crude oil stocks increased for three consecutive weeks since Feb. 19 after Winter Storm Uri on Feb. 15 forced the shutdown of more than half of the nation's refining capacity. With refineries unable to process crude, domestic crude oil inventories added a whopping 36.646 million bbl in less than a month. At 498.403 million bbl, inventories on hand jumped 5% above the five-year average early March and traders expect the building pattern to continue into mid-month.
API data also showed gasoline stockpiles fell 926,000 bbl, less than calls for a draw of 2.5 million bbl while distillate inventories rose 904,000 bbl versus an expected 1.6 million bbl decline.
In outside markets, equity futures in Wall Street posted modest losses in early trade as investors brace for one of the most important Federal Reserve policy decisions in years amid a relentless rise in Treasury bond yields and renewed concerns for faster near-term inflation. The central bank will also release today economic projections for the United States, expected to get a boost from a massive $1.9 trillion stimulus bill signed into the law late last week. The December Summary of Economic Projections indicated that Fed members expected improvement across all variables from 2020 to 2021. Specifically, members projected a 4.2% increase in gross domestic product for 2021 compared to the 2.4% decline for 2020. Fed members also projected a 5% unemployment rate for this year, down from 6.7% at the end of 2020.
Near 7:30 a.m. ET, West Texas Intermediate for April delivery declined 60 cents to below $65 bbl at $64.19 and Brent May crude on ICE dropped back 76 cents to $67.64 bbl. NYMEX April ULSD futures declined 1.91 cents to $1.9130 gallon and April RBOB futures fell 3.33 cents to $2.0679 gallon.
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