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Crude oil futures jump on bullish API data, improved demand outlook

Singapore — 0252 GMT: Crude oil futures jumped during mid-morning trade in Asia May 5, as an all-round bullish American Petroleum Institute report indicated improved fundamentals in the US, while optimism over the reopening of Europe provided further tailwind to the market.

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At 10:52 am Singapore time (0252 GMT), the ICE Brent July contract was up 86 cents/b (1.25%) from the May 4 settle at $69.74/b, while the June NYMEX light sweet crude contract was up 82 cents/b (1.25%) at $66.51/b.

The API data released late May 4 showed that the US' crude inventories fell 7.69 million barrels in the week ended April 30.

The fall in crude inventories was anticipated by analysts, who had told S&P Global Platts that they expected total refinery utilization to have increased 0.6 percentage points from the week prior to 86% of capacity in the week ended April 30. S&P Global Platts Analytics had also pegged refinery net crude inputs at above 15.2 million b/d in the same period.

Meanwhile, inventory movement in downstream product markets were also bullish, with the API data showing a 5.31 million-barrel and 3.45 million-barrel decline in US gasoline and distillate inventories, respectively.

The fall in gasoline inventories came as US gasoline consumption is edging higher ahead of the high-demand summer driving season. Apple Mobility data showed US driving activity at a four-week high in the week ended April 30.

Market participants will be looking towards the more comprehensive US Energy Information Administration report for corroboration of the API data, as well as for fresh pricing cues.

Meanwhile, the re-opening of Europe gained further traction after UK Prime Minister Boris Johnson said that lockdown rules are set to be scrapped in seven week's time, according to media reports. Speaking ahead of key elections, Johnson hailed UK's vaccination program and said the UK is on track to further relax its pandemic restrictions from May 17.

Meanwhile, media reports have said that Germany is also set to lift restrictions such as curfews on vaccinated people from as early as this week, and that the European Commission has also proposed to member states to allow those who have received an EU-approved vaccine to enter the economic bloc.

The market expects a rebound in demand in the US and Europe to compensate for the demand-destruction brought about by the pandemic in Asia, where countries such as India and Japan are still reeling from rising infection and fatality numbers.

"Clearly, the market is focusing more on re-openings, rather than the latest COVID-19 wave from the world's third-largest oil consumer, India," ING analysts said in a May 5 note.

"Part of the reason for this is the fact that the Indian government appears reluctant to impose a national lockdown, despite calls for one," they added.