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Energy Group: Oil Demand Growth Predictions Remain Robust
The oil market exhibited a stronger performance yesterday despite an anticipated increase in US CPI for January. ICE Brent, nearing the US$83/bbl milestone, concluded the day 0.94% higher. Crude market tightness was indicated by the prompt timespread trading at a backwardation of US$0.70/bbl, representing a significant increase from US$0.26/bbl earlier in the month. Together with firm refinery margins, this tightness looks set to bolster crude oil prices.
The API's latest inventory numbers presented a varied scenario, with a hefty 8.52m barrel rise in US crude oil inventory and a reported 500k barrel increase in Cushing stocks. Despite the seemingly bearish outlook for crude oil, substantial reductions in product stocks, including gasoline and distillate stocks falling by 7.2m barrels and 4m barrels respectively, balanced the scales. The ongoing BP Whiting refinery outage likely contributed to these shifts.
OPEC's recent monthly report refrained from adjusting its demand predictions, forecasting oil demand to rise by 2.25m b/d in 2024 and a further 1.85m b/d in 2025. These projections, significantly larger than IEA's expectations of 1.2m b/d growth for this year, highlight OPEC's bullish stance. Despite trimming non-OPEC output forecasts for 2024 by 150k b/d, the plan for increased output in Guyana counteracted reductions in Russia, the US, Kazakhstan and Oman. As for OPEC's production, January saw a decrease of 350k b/d MoM, led by Libya and further reductions from voluntary contributors.
Metals: Gold Dips Below Critical $2,000/oz Threshold
Hot on the heels of the unfavourable US inflation report, gold descended below the $2,000/oz mark for the first time since December, casting shadows over potential Fed rate cuts. Increased borrowing costs typically spell bad news for gold. Until now, geopolitical instability and optimism over Fed policy easing have kept gold above the $2,000 limit since mid-December. However, the outlook for gold is heavily reliant on the Federal Reserve's course of action, and any decrease in the rate of easing this year could compromise our annual forecast of $2,150/oz.
