The oil market reached balance earlier this year, and in May observable stocks were drawing at above seasonal rates. Still, forward looking indicators suggest this may be temporary: tanker loading are high and rising, OPEC compliance is slipping and non-OPEC growth is back above 1 mb/d.
Not all data points are bearish – stocksare down and demand is up: The expected inventory draws thatunderpinned buoyant market sentiment around the start of the year have started to come through in data in recent weeks. Observable inventories drew ~1 mb/d in May,and weekly stock data suggests draws have continued since then. On top, product demand is strong, firmly on track to grow 1.5 mb/d this year,underpinning strong refining margins, product cracks and tightening time spreads.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
