Continuation of the Crude Slump
The week losses have extended into the new week as new virus infections hit China, Japan and the United States. This raises concerns of people in the market on the return of normal demand that had previously raised sentiment at the easing of lockdown.
In the US the cutting of supply response to the virus continued, with Baker Hughes data showing active drilling rigs across the US falling for a 13th week to the lowest in more than a decade. The US shale oil industry has been one of the biggest casualties of the pumping war and price collapse.
That being said, the market is recovering across European trading hours, moving back up the $38 level on front month Brent.
Demand has rebounded strongly as the total volume of petroleum products supplied to the domestic market reached 17.6 million barrels per day (bpd) last week, up from a trough in the middle of April of just 13.8 million bpd.
The volume of gasoline supplied has been rising by around 5% per week for nine weeks, and is now running at 82% of the seasonal average for the last five years, up from just 55% in mid-April.
Gasoline has accounted for three quarters of the total acceleration in products supplied since the height of the lockdown, according to estimates from the U.S. EIA.
By contrast, distillate fuel oils, including road diesel, were initially hit less hard by the lockdown, but have shown a more gradual and faltering recovery as the restrictions have eased.
Refinery Output Up
China’s crude oil throughput in May rose 8.2% from a year earlier as independent refiners increased their processing to meet the recovery in fuel demand following the easing of coronavirus lockdowns.
China processed 57.9 million tonnes of crude oil last month, equivalent to about 13.63 million barrels per day. That is compared with 13.1 million bpd in April and is the fourth-highest per barrel rate ever. The record is 13.78 million bpd also in December.
In Japan, refineries increased their throughput in May by 8.2% more than the same period a year ago to about 13.6 million barrels per day (bpd), government data showed.