Crude oil rises on signs of improved US downstream demand

Singapore — 0317 GMT: Crude oil futures ticked higher during mid-morning trade in Asia April 29, as sentiment in the market remained positive amid signs of strong downstream demand in the US, but the progress of the pandemic in India remained on the market's radar.

At 11:17 am Singapore time (0317 GMT), the ICE Brent June contract was up 36 cents/b (0.54%) from the April 27 settle at $67.64/b, while the June NYMEX light sweet crude contract rose 29 cents/b (0.45%) at $64.15/b.

There was some bullishness in the market after the US' Energy Information Administration released its weekly data late April 28, which backed the narrative of a recovery in US oil demand.

Total products supplied, the EIA's proxy for demand, increased 8.7% on the week, in the week ended April 23 to 20.34 million b/d. The increase in implied products demand was largely powered by a 12.35% increase in implied distillates demand to 4.33 million b/d in the same period, even as implied gasoline demand edged 2.49% lower to 8.88 million b/d.

The increase in implied distillate demand sent distillate inventories 3.34 million barrels lower last week to 139.05 million barrels. Gasoline inventories, meanwhile, climbed 90,000 barrels to 235.07 million barrels even as Apple mobility data showed US driving activity edging 0.4% higher last week.

The headline increase in US crude inventories was 90,000 barrels, according to the EIA data, which put stocks 0.3% behind the five-year average and erased a surplus that has persisted since the week ended March 27, 2020. Even though crude inventories registered a rise, the market took it as a positive development, as the rise was much smaller than the 4.32 million-barrel build reported by the American Petroleum Institute on April 27.

The increase in US oil demand, as per the EIA report, came amid the market's assessment of improved US economic conditions. The Federal Reserve, on April 28, echoed the market's view of bullish economic conditions in the country, saying that amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened.

Elsewhere, however, concerns over the pandemic and its pernicious impact on economic activity have escalated. COVID-19 infection and fatality numbers in India, the third largest importer of crude oil, have shown no signs of abating, with the country reporting record 360,927 new cases and 3,293 deaths on April 27, latest data from John Hopkins University showed.

"While demand appears to be trending in the right direction in the US, there are still clear concerns over the impact that the surge in COVID-19 cases in India is having on fuel demand," ING's head of commodities strategy Warren Patterson and senior commodities strategist Wenyu Yao said in an April 29 note.

They noted growing interest from Indian refiners to export refined products to prevent domestic inventories from burgeoning, and added that "increased export flows from India are a risk to regional product cracks."