Brent crude hits 22-month high as OPEC raises 2021 demand outlooks

Crude futures rallied nearly 3% March 11 amid a rising tide of bullish sentiment fueled by improved second-half 2021 outlooks.

In its closely watched Monthly Oil Market Report released March 11, OPEC revised up its forecast of 2021 oil demand by 220,000 b/d to 96.27 million b/d, but said the recovery would be backloaded in the second half of the year, after disappointing data in Q1.

Estimates for Q3 and Q4 were raised by 400,000 b/d and 970,000 b/d, respectively, while Q1 and Q2 were lowered by 180,000 b/d and 310,000 b/d.

The downward revision for the first half of the year is due in large part to the impact of pandemic restrictions across Europe, the group said.

“Oil demand in 2H21 is adjusted higher, reflecting expectations for a stronger economic recovery with the positive impact of vaccination rollouts,” OPEC said in the report. “Oil requirements in 1H21 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.”

Front-month ICE Brent last settled higher on May 28, 2019.

NYMEX April RBOB climbed 5.85 cents to $2.1380/gal, and April ULSD was up 4.21 cents at $1.9594/gal.

“Europe is the big drag for the demand side and that won’t dramatically improve until more COVID vaccines become readily available,” OANDA senior market analysts Edward Moya said in a note. “Energy market traders are still expecting a tight oil market as OPEC+ will only raise output once the recovery in oil demand is clear.”

Demand outlooks were further buoyed by the passage of the $1.9 trillion US stimulus plan. President Joe Biden signed the bill into law late March 11.

The bills’ passage added pressure to the US dollar, adding further upward pressure to commodity prices. The ICE US dollar index slid to around 91.45 in afternoon trading, down nearly a full percentage point from its recent peak of 92.33 on March 8.

The front-month ICE New York Harbor RBOB crack versus Brent climbed to $19.58/b in afternoon trading, on pace to close at a fresh three-and-one-half year high.