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Crude oil prices tick higher as optimism over demand recovery overshadows EIA data


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Crude oil prices tick higher as optimism over demand recovery overshadows EIA data

Singapore — 0314 GMT: Crude oil futures ticked higher during midmorning trade in Asia Feb. 25 as the market overlooked bearish data from the US Energy Information Administration to focus on optimism over declining COVID-19 infection numbers and vaccine rollouts.

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At 11:14 am Singapore time (0314 GMT), the ICE April Brent futures contract was up 31 cents/b (0.46%) from the Feb. 24 settle at $67.35/b while the NYMEX April light sweet crude contract was up 20 cents/b (0.32%) at $63.42/b.

Data from the EIA released late Feb. 24 showed that US commercial crude inventories increased 1.28 million barrels at 463.04 million barrels in the week ended Feb. 19. The build came contrary to analysts' expectations of a 4.8 million barrel draw, and was attributable to power outages and extreme low temperatures in southern US, which shut up to 4.4 million b/d of refinery capacity at its peak.

The EIA data also showed a 10,000 barrel increase in US gasoline inventories, with a sharp reduction in refinery production countered by storm-blunted driving demand. Implied gasoline demand registered a 1.2 million barrel decline -- the largest decline since early April 2020 -- as Apple Mobility Data showed US driving to be down nearly 7 percentage points.

The market largely shrugged off the bearish elements and continued to focus on oil's rosy demand outlook amid declining COVID-19 infection numbers.

"Investors are focused on the pick-up in oil demand as vaccine roll-outs and tapering COVID-19 infection numbers offer a glimpse into an oil sector post-pandemic," David Lennox, resource analyst at Fat Prophets, told S&P Global Platts on Feb. 25.

"[The EIA data] failed to dent the optimism in the market that widening vaccination availability is easing restrictions and boosting demand in the US. In Asia, increased travel has returned demand to pre-pandemic levels in India [and] China's consumption has also recovered significantly," ANZ analysts said in a Feb. 25 note.

The situation is picking up in Europe too, with downstream gasoline demand forecast to rise 60,000 b/d on the month in February, and regional diesel and gasoil demand also expected to improve by around 60,000 b/d, according to S&P Global Platts Analytics.

Economic mobility in Europe's five biggest economies seems to be picking up, with Google data showing that average mobility indexes in France, Germany, Italy, Spain and the UK were 37.7% below precrisis levels in the week to Feb. 20, compared with 40.4% below in the week to Feb. 13.

"We think that given the improving demand outlook, the current prices for oil are sustainable, but we must remain cautious as increased supply from either the OPEC+ or from US shale producers could stem oil's rally," Lennox added.