Price Performance Indicators
The COFR crude oil contract closed last week with a gain of 3.24% to the level of Rp 1,016,200 per barrel. During the week, oil was "pampered" with a series of positive issues that overall provided optimism in terms of supply and demand levels. Starting from optimistic demand projections, the threat of disruption to production activities, to reports of depleted US stock levels, are the main fuel for price strengthening.
In terms of consumption levels, the issue came from the projected demand for China, as one of the world's largest crude oil consumers. Oil demand in China is expected to increase by 13% each, compared to the same period in 2019 before the pandemic, said SIA Energy, a consulting firm that focuses on monitoring the oil and gas market in China. Overall fuel demand in China will rise 4% driven by gasoline demand which is expected to soar up more than 20% triggered by the recovery due to the re-activity of traffic activities on the road.
Meanwhile, in terms of production activity, Libya's oil production has the potential to decline again due to the struggle for political power in the oil-producing country from North Africa. Also supporting oil prices, about three-quarters or 1.4 million bpd of oil production off the coast of the US Gulf of Mexico is reported to have stalled since Hurricane Ida hit in late August. This led to the decision of the largest US Gulf of Mexico producer, Royal Dutch Shell Plc to cancel some export cargoes due to damage to offshore facilities, signaling the loss of energy will continue for weeks.
Finally on the supply side, US crude inventories for the week fell by 5.44 million barrels, according to data from industry group the American Petroleum Institute (API) for the week ended Sept. 10. In addition, the US government statistics agency, Energy Information Administration (EIA) also reported that US crude oil stocks fell by 6.42 million barrels, far exceeding predictions that forecast a decline of 3.54 million barrels. Gasoline stockpiles were also reported to have fallen by 1.86 million barrels, lower than the original forecast for a decline of 1.96 million barrels.
Markets are Anxious About The Global Economic Recovery
Looking ahead, oil prices are projected to move with a focus on developments related to the pandemic. The rumors that emerged as a result of the market's familiar assessment of the current statistical developments of the pandemic will continue to move oil prices. Recently, from China and India, with the spike in cases in various regions, the market has begun to anticipate the re-locking action carried out by the authorities. Apart from the US, the issue of the policy plan for easing air travel in November will also be further watched by the market as the main assessment of the level of fuel demand – as the main derivative of crude oil going forward.
US - CPI m/m
US - Industrial Production m/m
EIA - Crude Oil Inventories
US – Retail Sales m/m
Source: ICDX Research