Crude hits 7-week high on bullish demand outlooks

Crude oil futures on May 4 settled at the highest since mid-March as improved demand outlooks in Europe, the US and China overshadowed the downside impacts of regional pandemic lockdowns.

June NYMEX WTI settled $1.20 higher at $65.69/b, and July ICE Brent was up $1.32 at $68.88/b.

It was the highest front-month settle for WTI since March 11, while Brent futures were last higher March 12.

The European Commission is considering allowing non-essential flights from outside its member state territory for travelers vaccinated against COVID-19 amid hope of firming demand in the jet fuel market as holiday season looms.

The commission is proposing member states allow people who have received an EU-approved vaccine to enter the economic bloc, the EU said in a statement May 3.

June NYMEX RBOB settled up 4.97 cents at $2.1512/gal, while June ULSD climbed 4.69 cents to $1.9988/gal, the highest since Jan. 7, 2020.

"The EU's plans to ease curbs for vaccinated travelers as soon as this summer helped fuel expectations for an extraordinary recovery in energy demand on the horizon, following a powerful recovery in US and Chinese demand for products," TD Securities analysts said in a note. "This is crushing concerns that the rampant spread of COVID-19 in India will push back the global recovery, particularly as a flattening curve in India suggests the spread could be contained, avoiding a disastrous worst-case scenario."

Platts Analytics expects jet fuel and kerosene demand in Western Europe to recover by 246,000 b/d this year to an average 971,000 b/d after more than halving in 2020. Due to expected behavioral changes in the wake of the pandemic and the growth of alternative aviation fuels, jet demand in the region is not expected to recover to the 2019 level of 1.5 million b/d before 2040.

"Crude prices remain elevated as both the supply- and demand-side fundamentals remain very bullish," OANDA senior market analyst Edward Moya said in a note. "The energy market no longer has oversupply concerns as US production will likely remain stable and as OPEC+ is sticking to its plan to gradually increase output. The crude demand outlook is getting mixed headlines, but nothing too negative that will change the overall improving theme."

The higher settle for oil comes despite an uptick in the US dollar. The front-month ICE US Dollar Index was holding at around 91.29 in afternoon trading, up from a close of 90.945 on May 3 and on pace for its highest close since April 22.

RBOB CRACKS CLIMB AMID BAYWAY SHUTDOWN

Phillips 66 took down the 145,000 b/d fluid catalytic cracking unit at its 258,000 b/d Bayway refinery in Linden, New Jersey, late May 3 after a leak was discovered, a source familiar with refinery operations said May 4.

The front-month ICE New York Harbor RBOB crack versus Brent climbed to $20.91/b in afternoon trading, on pace for its highest close since August 2017.

The shutdown of the gasoline producing unit, which sources said should be offline for several days, is likely to add pressure to already tight regional gasoline inventories at a time when suppliers are typically stockpiling ahead of the busy summer driving season.

US Atlantic Coast stocks were around 2.3% below their five-year average during the week ended April 23, US Energy Information Administration data shows.