Crude rally extends amid weaker dollar, improved demand outlooks

Crude oil futures settled higher April 13 on the back of a weaker US dollar and improved global demand outlook.

NYMEX May WTI settled up 48 cents at $60.18/b and ICE June Brent moved 39 cents higher to $63.67/b.

In its closely watched monthly oil market report released April 13, OPEC raised its demand forecast by 190,000 b/d from its March estimate, expecting consumption to average 96.46 million b/d this year, citing economic stimulus programs and a further easing of COVID-19 lockdown measures.

Year on year, global oil demand was projected to grow 5.95 million b/d in 2021, compared with the 5.89 million b/d forecast in March.

NYMEX May RBOB was up 57 points at $1.9757/gal and May ULSD climbed 65 points to $1.8145/gal.

Rising rates of infection from coronavirus and new lockdowns across Europe, Latin America, and India has resulted in four straight months of declining demand totaling 3.4 million b/d since December, according to S&P Global Platts Analytics data. However, strong demand growth is expected from May to August, driven predominantly by seasonal factors as well as government stimulus and economic recovery, will see demand rebound 7.2 million b/d -- threefold the normal seasonal response.

"Oil prices are holding their own fairly well given the high investor optimism and a generally weaker US dollar of late," Eugen Weinberg, Head of Commodity Research at Commerzbank, said in a note. "Furthermore, hopes of increased demand this year are having a supportive effect."

The ICE US Dollar Index fell to around 91.85 in afternoon trading, down from an April 12 close of 91.144. It was the first time the index has fallen below 92 intraday since March 23.

The strength of the dollar and dollar-denominated commodities, including oil, are typically inversely correlated.

Meanwhile, the dispute over so-called field allowances paid to Libya's Petroleum Facilities Guard has returned, with the potential to lead to some oil terminal closures later this month, industry sources said April 12.

The PFG, which controls key eastern terminals and some oil fields in Libya, has clashed with the finance ministry over salary and field allowance payments in the past few months.

On April 11, the PFG at Libya's 300,000 b/d Es Sider terminal wrote a letter threatening to shut down exports by April 25 if their March salaries did not include field allowances.

"Pay disputes could potentially result in some Libyan oil port disruptions, just as some nascent signs emerged that oil exports were stabilizing following a tumultuous few months," TD Securities analysts said in a note. "Our real-time gauge of global energy supply suggests supply risk premium has risen to reflect the increased tensions."

CHINA CRUDE DEMAND JUMPS

China's crude imports surged 20.8% year on year to 11.74 million b/d in March, bringing total volume in the first quarter to 11.34 million b/d, a jump of 10.7% on the year, preliminary data released April 13 by the General Administration of Customs showed.

Crude oil analysts warned that the rise should not be "over-interpreted" as it was due to a relatively low base in March 2020 at 9.72 million b/d, when Chinese demand slumped as COVID-19 led to lockdowns across the country.

Looking at Q2, China's crude imports are more likely to see a year-on-year decline rather than growth as "we do not expect the unprecedented inflows in May and June last year to repeat themselves this year because of higher crude prices," Platts Analytics said.