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Commodity prices are rising despite declining Asian oil imports

The world’s most important oil import region, Asia, is showing signs of weaker physical demand with lower freight arrivals in May and declining refining margins as the revival of COVID reduces fuel demand in India and other markets. in South Asia. Crude oil futures prices gathered to a two-year high this week, after OPEC + confirmed its plans to develop another 840,000 barrels per day (bpd) from its total reductions in July.

Still, provisional crude oil imports for Asia’s best markets signal that physical demand is softer than investors are betting on the paper market, Reuters columnist Clyde Russell said. disputes.

However, most analysts, forecasters, OPEC and the International Energy Agency (IEA) continue to expect strong global oil demand in the second half of this year, which will compensate for the weakness of some Asian markets this quarter.

The COVID crisis in India, which peaked in early May, and the return of restrictions in several South Asian countries such as Malaysia, which is now at the third lock, have stifled fuel demand in many parts of Asia in recent weeks, inflating fuel stocks further and failures to clear margins. In addition, some refineries, including the world̵

7;s largest importer in China, introduced scheduled seasonal maintenance this spring and reduced crude oil consumption in the second quarter.

As a result of all these factors, imports into the Asian region are expected to fall in May to the lowest monthly level so far this year. Last month, Asia imported 23.07 million barrels of crude oil, up from more than 24 million barrels a day in April and March and 25.2 million barrels a day in February, according to Refinitiv Oil Research, quoted by Reuters Russell.

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The Indian health crisis has led to reduced refinery operations and crude oil imports are likely to have fallen to 3.90 million barrels per day in May, from 4.46 million barrels per day in April, according to Refinitiv.

Analysts expect imports in June to remain weak at the world’s third-largest oil importer, but consumption is expected to return to its previous rate in July, according to assessments from the US Energy Information Administration.

While India and other markets in South Asia are currently wild cards in terms of consumption prospects, the recovery in demand is clearly evident in the US and Europe.

According to GasBuddy, demand for gasoline in the United States on Sunday during Remembrance Day weekend jumped 6.8 percent from the previous Sunday and rose 9.6 percent above the average for the past four Sundays. This was the biggest demand on Sunday since the summer of 2019, said Patrick De Haan, head of oil analysis for GasBuddy.

Crude oil futures market participants are encouraged by the pace of recovery in large developed economies, where vaccination programs are advancing. They are also encouraged by recent estimates by OPEC and the IEA that global oil demand is expected to return to pre-COVID levels within a year.

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“Demand may return to pre-crisis levels in a year or more,” IEA Executive Director Fatih Birol told Bloomberg this week. strong demand in the United States, Europe and China. This latest proclamation on oil demand is in stark contrast to the forecast three months ago, when the IEA stated in its annual oil report 2021 with forecasts until 2026 that global oil demand will take until 2023 to return to pre-pandemic levels of 100 million bpd.

OPEC + approved previous forecast this week that oil demand should rise by 6 million barrels per day to an average of 96.5 million barrels per day this year.

“In fact, we expect demand to exceed 99 mb / d in the fourth quarter, bringing us back to pre-pandemic levels,” said OPEC Secretary General Mohammad Barkindo.

At the OPEC + ministerial meeting, “noted the continuing strengthening of market bases, with oil demand showing clear signs of improvement and OECD stocks falling as economic recovery continues in most parts of the world with accelerating vaccination programs,” OPEC said. said after pact participants decided to continue plans to ease the cuts in July.

Demand in South Asia will continue to be a problem – and a closely monitored metric – going forward, but analysts and forecasters do not currently see it as a major obstacle to soaring global oil demand by the end of this year.

By Tsvetana Paraskova for Oilprice.com

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