Crude moves higher on US inventory draw, global demand expectations

London — 0925 GMT: Crude oil futures were a tad higher in the morning trade May 12 following the data released by the American Petroleum Institute, or API, that showed a decline in US crude stocks.

At 10:25 am London time (0925 GMT) May 12, the ICE Brent contract was up 41 cents/b (0.6%) from the May settle at $68.94/b, while the June NYMEX light sweet crude contract was up 41 cents/b (0.6%) at $65.70/b.

The latest API report on May 11 showed a decline of 2.5 million barrel in US crude inventories for the week ended May 7. Distillate stocks fell by 870,000 barrels, while gasoline showed a build of 5.6 million barrels. The Energy Information Administration, or EIA, report due on May 12 is expected to show a decline of 4.1 million barrels of crude oil.

The International Energy Agency, or IEA, in a recent report cut its forecast for 2021 global oil consumption by 270,000 b/d, citing India's COVID crisis as a factor in the downgrade. However, the IEA still anticipates an overall rise in global oil consumption of 5.4 million b/d, based on the belief that vaccination efforts will continue to stem the tide of the pandemic.

The IEA also expects an increase in oil supply in May. "World oil supply rose 330,000 b/d to 93.4 million b/d in April and will increase further in May as the OPEC+ alliance continues to ease output cuts. Based on the current agreement, global oil production is set to grow by 3.8 million b/d from April to December," it said. "For 2021 as a whole, world oil production expands by 1.4 million b/d year-on-year versus a collapse of 6.6 million b/d in 2020. Canada leads non-OPEC+ with growth of 340,000 b/d, while the US is set to contract by a further 160,000 b/d."

Furthermore, the IEA report anticipates that "while the market looks oversupplied in May, stock draws are set to resume from June, even with global oil supply on the rise."

Meanwhile, OPEC itself is keeping its world crude outlook for 2021 unchanged at 96.46 million b/d, expecting most of the demand growth to occur in the second half of the year, it said in a May 11 report.

"Positive transportation fuel data from the US, and acceleration in vaccination programs in many regions provide further optimism in H2 2021," OPEC said. "The assumed return to some degree of normality and improved mobility is also expected to positively affect regions such as the Middle East and other Asia in H2 2021."