China processed more than 14 million barrels a day in January and February, and refiners have kept consumption above that level every month since June. There are also signs that demand is picking up in other countries. The number of U.S. air passengers hit a 12-month high on Friday, while road use is creeping up in parts of Europe.
Crude has rallied strongly this year, supported by the vaccine-aided recovery from the pandemic and OPEC+’s decision to keep a tight rein on supplies. That combination — plus attacks on Saudi oil infrastructure — helped Brent top $71 a barrel last week, and drawdowns from inventories are expected to continue.
“Further price strength is very feasible,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. An increase to $80 later this year “has now become more than just wishful thinking.”
Citigroup, like PVM, also said Brent could spike to $80 amid “aggressive” actions by the Organization of Petroleum Exporting Countries and its allies. The bank sees prices averaging $69 this year, up $5 from its previous outlook.
There are some less positive signs in the short-term, however. WTI’s nearest timespread flipped into a bearish contango structure — signaling oversupply — after crude stockpiles in the U.S. grew in recent weeks.