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Vol. 26, No.37 Week of September 12, 2021
Providing coverage of Alaska and northern Canada's oil and gas industry

Asia oil demand back; price little changed; demand checks delta fears

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Steve Sutherlin

Petroleum News

Alaska North Slope crude gained 71 cents Sept. 8 to close at $72.17 per barrel, while West Texas Intermediate leapt 95 cents to close at $69.30, and Brent was up 91 cents to close at $72.60.

For the three indexes, the climb was a claw back from two days of losses. ANS lost 90 cents Sept. 7 to close at $71.46, while WTI lost 94 cents to close at $68.35, and Brent lost 92 cents to close at $71.69.

There was no trading Monday Sept. 6.

The prior week closed with losses. ANS shed 47 cents to close at $72.36 on Sept. 3. WTI closed 70 cents lower at $69.29 and Brent closed 42 cents lower at $72.61.

The losses, however, were preceded by strong gains on Sept. 2, with ANS gaining over 2% - up $1.48 to close at $72.83. WTI rose by $1.04 to close at $69.99 and Brent jumped $1.44 to close at $73.03.

For all the volatility on the week of trading, the Sept. 8 closing prices of ANS, Brent and WTI were only pennies away from Sept. 1 closing prices.

At $71.59 on Sept. 1, Brent, in fact, closed just a penny away from its $72.60 close of Sept. 8.

The delta variant is still out there to spook prices lower, but once again, demand has proven resilient in the face of COVID uncertainty, and price recovery was the result. Once again, the market churns, but countervailing forces achieve a tenuous balance. Again, ANS and Brent occupied the lower $70s for a week, while WTI flirts with the $70 mark.

US still motoring, Asia rising

Even as the delta variant wreaks havoc on reopening plans in the United States, its citizens haven’t stopped motoring, driving fuel prices higher in the face of delta downdrafts. That strength is ongoing.

And now, new puffs of optimism out of Asia add additional lift to demand. India is rising out of the COVID-19 chaos that disrupted its economy over the summer, and China appears to have shut down a surge of infections that locked down a large swath of the Chinese economy over recent months.

Demand for gasoline has reached pre-COVID levels in India, amid expectations that diesel demand will hit pre-pandemic levels soon, although the outlook for jet fuel remains subdued, according to a S&P Global Platts report.

Analysts said the country is seeing a resurgence of the coronavirus in some pockets, but it’s not deep enough to make a large dent in overall demand.

Some refiners already plan to lift runs to 100% of their capacities for the rest of the year.

According to S&P Global Platts Analytics, India’s refinery runs in the first seven months averaged 4.8 million barrels per day, projected to rise to 5 million bpd for the remaining months, as demand improves in both domestic and export markets.

“With the recovery in the overall demand, refining and other related operational parameters have demonstrated an even more pronounced turnaround compared to the previous year,” said Shrikant Madhav Vaidya, chairman of state-run Indian Oil Corp. the country’s biggest refiner.

India’s quarter-on-quarter oil demand is expected to increase by 185,000 bpd in Q3 and by as high as 525,000 bpd in Q4, driven by a more broad-based pick-up in economic activity amid widening vaccination rollout, Platts Analytics said.

“Indian refiners processed 19.38 million metric tons of crude oil in July, an average of 4.6 million bpd, up 9.6% on the year, and 5.35% higher from June levels,” Platts Analytics said, adding that analysts said refinery runs in August could improve for the second month in a row as local oil demand recovers.

China lockdowns recede

Chinese authorities meanwhile are in the process of lifting massive lockdowns that curtailed public transport and taxi services in delta variant hotspots nationwide, while slashing train service and subway use in Beijing. China airlines are resuming some previously suspended flights, lifting domestic jet fuel demand.

China likely will contribute to international flight recovery this year, an Aug. 25 Argus report said, adding that China Eastern led major China airlines adding back seat capacity, with over 23% capacity growth from a week earlier, according to a report by flight data provider OAG.

The Civil Aviation Administration of China, however, is likely to keep the current tight caps on international flights into the first half of 2022, Air China is quoted as saying in a Sept. 2 Reuters report.

The CAAC said in August that weekly international flights were at only 2% of 2019 levels, as flights were suspended amid a rising number of imported COVID-19 cases.

“Air China management told analysts that the recovery of China’s outbound travel would be slower than that in the United States and Europe, adding that the vast majority of developing countries have not achieved high vaccination rates,” Reuters said.

- STEVE SUTHERLIN



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