DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange kicked off a new trading week with a solid rally after government data from China showed exports of refined fuels during January and February plummeted by double-digits from a year ago. It suggested a rebound in domestic fuel demand from transportation and heavy industry sectors while the disruption in Russia's refining complex following a fresh wave of drone attacks on its energy infrastructure could further tighten physical product market in coming weeks.

Bank of America Global Research, citing National Bureau Statistics and China Customs data, said in a note to clients that Chinese exports of gasoline, diesel and kerosene fell to 5.6 million metric tons (mmt) during the first two months of the year, down 42% year-over-year. In January-February 2023, export volumes marked a post-pandemic high.

China's domestic demand for air travel and road mobility recovered to pre-pandemic highs during this year's Lunar New Year Festival, celebrated from Jan. 21-Feb. 20, suggesting Chinese consumers feel more confident about spending and travel despite weakness in some pockets of the economy.

Data released overnight also showed retail sales and industrial production for January and February in China beat market expectations, with retail sales up 5.5% compared with expectations for a 5% increase. Industrial production climbed 7% compared with estimates of a 4.5% growth rate. The latest macroeconomic data might suggest that China's domestic demand has begun to recover from its pandemic-induced slump.

Separately, Ukraine launched a new attack March 17 on the Russian refining complex, targeting the Slavyansk-on-Kuban plant in the southern Krasnodar region. According to media reports, the attack sparked a violent fire at the refinery and affected electricity supplies across border regions with Ukraine.

The string of drone attacks on Russian refineries in recent days has disrupted at least 17% of Russia's refining capacity that, according to Russian officials, will lead to a short-term increase in crude oil exports. Russia's Energy Minister Nikolay Shulgin said last month that Russia has already reduced crude-processing activity by 7% since the beginning of the year.

West Texas Intermediate (WTI) and Brent futures extended last week's rallies triggered in part by a bullish near-term demand outlook from the International Energy Agency (IEA) that now forecasts the global oil market disposition will slide into a deficit this year compared with expectations in February for a modest surplus. Underlying the bullish forecast is the assumption that OPEC+ cuts that now run through the end of the second quarter will be extended through the remainder of the year while global oil demand picks up momentum on the back of robust U.S. growth and signs of recovering fuel consumption in China.

At settlement, NYMEX April WTI futures rallied $1.68 to $82.72 per barrle (bbl), trading intraday at a $83.09 bbl 4-1/2 month high on the spot continuous chart, with next-month May WTI futures holding a $0.56 bbl discount. ICE May Brent futures advanced to $86.89 bbl, up $1.55 bbl on the session after trading at a $87.18 4-1/2 month high on the spot continuous chart. NYMEX April ULSD futures gained $0.0612 to $2.7882 gallon, edging off a $2.7963 four-week period on the spot chart. April RBOB futures added $0.0365 for a $2.7573 gallon settlement, trimming an advance to a $2.7678 six-month high on the spot continuous chart.

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