Bulls keep control of crude oil prices

Crude oil prices continue to strengthen with Brent first nearby prices trading as high as $109/b yesterday, buoyed by expectations of an easing monetary policy in China (see macro comment) and latest monthly reports from international agencies pointing to a sharp downturn of Russian crude oil production due to the impact of Western sanctions. 

Indeed, the IEA estimates that Russian crude oil output may drop by 1.5 Mbd m-o-m in April (which is twice lower than the previous estimated drop) but maintains expectations of a possible 3 Mbd drop in May compared to March. The agency also revised its global demand forecast 0.26 Mbd lower for 2022 and sees a crude market fairly balanced this year.

In the US, a sharp crude stock build at 9.4 Mb last week (much above market expectations, see below chart) on the back of the massive 180 Mbd stock release from US SPR tempered the bullish sentiment. But morning reports that major global trading houses are planning to reduce crude and fuel purchases from Russia’s state-controlled oil companies as early as May 15 could continue to provide support to crude prices today.