This week’s EIA data recorded a sharp, 1.2mmb/d (6.5%) WoW increase in implied all product demand. Implied gasoline demand rose 0.5mmb/d (5.6%) WoW to 9.1mmb/d, the highest level YTD. Implied distillate demand regained most of last week’s fall, with a 0.3mmb/d WoW (9.1%) increase. Implied demand for Propane/Propylene and Jet Kerosene also strengthened WoW, rising toward and above the prior five year range, respectively. With all product implied demand at 19.4mmb/d, this was the strongest set of demand data in the YTD. However, all product demand on a 52-week average basis remains very soft, at -2.8% and at -3.6% on a YTD average basis, YoY – and one swallow does not a summer make.
Crude inventory remains swollen after shedding just 0.2mmbbl, despite refinery throughput increasing 0.2mmb/d, consistent with our view that the market is being over-supplied. Gasoline inventory fell 1.7mmbbl on the back of the surge in demand, however, we believe that inventory levels are sufficient on a Days Forward Cover basis, at present.
Despite the bounce in demand, in view of the current oversupply to the market, we believe the risk to oil prices lies to the downside. We expect today’s OPEC meeting in Vienna and next week’s P5+1/Iran meeting in Moscow to have more impact on the short-term direction of crude oil prices.