Crude futures test fresh highs on bullish US demand outlook

Crude futures pushed to fresh highs June 15 as bullish US demand outlooks pointed to a tightening fundamental picture.

NYMEX July WTI settled $1.24 higher at $72.12/b, and ICE August Brent climbed $1.13 to $73.99/b.

"Oil is continuing to push higher here and a good part of that is because the crude demand recovery story is looking like it's still going to be pretty robust," OANDA senior market analyst Edward Moya said. "There is a lot of optimism that we are going to return to normal probably right after summer ends, and that is something that a lot of people didn't anticipate."

It was the highest front-month settle for WTI since Oct. 10, 2018, while ICE Brent was last higher April 25, 2019.

New York Governor Andrew Cuomo on June 15 lifted all remaining pandemic restrictions as the statewide vaccination rate for adults hit the 70% threshold.

NYMEX July RBOB settled 7 points lower at $2.1705/gal, while July ULSD climbed 7 points to $2.1123/gal.

The International Energy Agency on June 11 said it expects global oil demand to return to pre-pandemic levels by the end of 2022. The IEA forecast global oil demand would increase 5.4 million b/d in 2021 and a further 3.2 million b/d in 2022 to an average of 99.5 million b/d.

But outside of the US, the energy recovery story is less certain, analysts said.

"In China, which has been responsible for the lion's share of the recovery in the past 15 months, [demand] appears to be cooling again somewhat: high prices, low refinery margins, fairly high inventories and an increasing focus on electric vehicles are all taking their toll," Eugen Weinberg, Commerzbank's head of commodity research, said in a research note June 15.

UK Prime Minister Boris Johnson announced June 14 the government would postpone for four weeks the June 21 deadline for easing pandemic restrictions as the spread of the new coronavirus variant has contributed to rising case numbers.

Still, OPEC+ production management is likely to contribute to a tightened supply picture later in 2021 that should support higher prices, analysts said.

Vitol, the world's biggest independent oil trader, expects global oil prices to trade in the $70-80/b range for the remainder of 2021 as OPEC+ producers maintain their production discipline to accommodate the expected return of Iranian oil exports to the market, CEO Russell Hardy said June 15.

The oil market could return $100/b this year, top oil forecasters said June 15, but the consensus is for OPEC+ to provide a ceiling to prices with greater risks of supply shortages and potential price shocks in the years ahead.

Jeff Currie, Goldman Sachs' head of commodity research, emphatically entertained the idea of triple-digit crude at the S&P Global Platts GEPEC conference, while warning the end of investment in long-term crude projects and the ripple effect that could have on prices further out.

The commodity super-cycle advocate added in the near-term the markets give a 10% probability oil is going to go over $100/b between now and the end of 2021.

Product cracks weaken as RINs retreat

US refined product prices were little changed as continued weakness in Renewable Identification Number values added headwinds.

S&P Global Platts assessed current year D6 RINs at $1.4475/RIN on June 15, a decline of 21 cents, or 13%, from June 14 and down nearly 28% from their all-time high of $2/RIN seen intraday early June 10.

Refiners and importers, called "obligated parties," use RINs to show the EPA that they have fulfilled their mandated government use of renewable fuels. If the obligated party has not used enough physical product, it can buy RINs to satisfy the quota.

The market is hedging possible policy relief to refiners by selling RBOB and ULSD cracks, S&P Global Platts analysts Sergio Baron said.

The ICE New York Harbor RBOB crack versus Brent fell to around $17.31/b in afternoon trading June 15, in from $18.41/b on June 14 and on pace for the lowest close since March 19. The ICE NYH heating oil crack versus Brent was down more than $1 at around $14.88/b, the weakest since May 3.