Crude oil advanced on Wednesday, as heavy draw in gasoline supplies dominated markets, despite larger than expected U.S. crude stockpiles. Light sweet crude futures traded up 0.25% at $60.86 on the NY Mercantile Exchange.
Crude stockpiles grew by 5 million barrels in the week to March 9, compared to market expectations of 2 million barrel, according to Energy Information Administration’s weekly petroleum status report. But, gasoline inventories fell by 6.3 million barrels. This suggested that refineries may demand more crude oil in the future.
The Organization of the Petroleum Exporting Countries (OPEC) lifted non-OPEC production growth outlook in 2018 by 280,000 barrels per day to 1.66 million barrels per day this year. OPEC trimmed 2018 crude demand estimate by 250,000 barrels per day to 32.61 million barrels per day.
The growth in gasoline is expected to be on the upward swing as seen from BMI Research’s global LNG tanker market outlook that looks increasingly bullish for 2018 and 2019. This was due to strong demand growth and a thinning order book pressure the available supply.
The firm stated that the tanker market is highly cyclical and given the lead time on tanker orders, which is typically 24-36 months, the decrease in the order book signals a significant tightening of tanker supply over the coming two to three years.
The commodity got off a strong start this year with the West Texas Intermediate (WTI) crude futures rising 7.1% in January. Crude futures still trade above the $60-level despite the 4.8% drop in February on the broad stock selloff.
Crude stockpiles grew by 5 million barrels in the week to March 9, compared to market expectations of 2 million barrel.
Oil production has been in decline since 2006 due to the mature nature of the fields and falling investment. Likewise, gas production has declined by around 20% since 2013, and further sufficient resources are not now being developed to offset the expected decline.
A recent report from brokerage firm Bank of America (BofA) Merrill Lynch showed that global crude oil demand to peak by 2030. In contrast, the expectations from the International Energy Agency, the U.S. Energy Information Administration, and OPEC do not predict a peak by 2040.