Supply concerns eased after TC Energy Corp restarted a section of the Keystone pipeline, allowing some flows to resume, which should see a partial recovery of crude oil supply flow from Canada to the US
ICE Brent prices settled higher for a third consecutive day yesterday following an upward revision in the oil demand forecast by the International Energy Agency (IEA). However, the weekly petroleum report from EIA and softer demand data from China this morning weighs on the sentiment. TC Energy Corp restarted a segment of its Keystone oil pipeline, extending between Hardisty, Alberta to Wood River and Patoka, Illinois. This should see a partial recovery of crude oil supply flow from Canada to the US. A restart for the remaining section of the pipeline remains uncertain.
The IEA released its latest monthly oil market report yesterday and the agency made revisions higher to its demand growth forecasts for 2022 and 2023 on account of stronger demand from non-OECD countries including China, India and the Middle East. The IEA now expects global oil demand to grow by 2.3MMbbls/d (+140Mbbls/d compared to last estimates) in 2022 and 1.7MMbbls/d (+100Mbbls compared to previous estimates) in 2023. The IEA also said that total OECD oil stocks declined in November, pointing to a rise in refinery demand. As for the Russian oil supply, the agency predicted that the output could fall by 1.4MMbbls/d over the next year following the latest price cap imposed by the G7. Meanwhile, Russian oil exports rose by 270Mbbls/d to 8.1MMbbls/d in November, the highest since April.
The latest data from the EIA shows that US commercial crude oil inventories increased by a huge 10.2MMbbls over the last week despite the supply disruptions witnessed due to the outages at the Keystone pipeline. Withdrawals from the Strategic Petroleum Reserve (SPR), the world's largest supply of emergency crude oil, continued over the week and SPR crude oil inventory dropped by around 4.7MMbbls, limiting the total crude oil inventory increase to 5.5MMbbls for the week, still the biggest increase since March 2021. The market was expecting a drawdown of 3.4MMbbls. Refined product inventory has also increased over the last week reflecting a slowdown in demand for the fuels. EIA data shows that gasoline inventories rose by 4.5MMbbls, against a forecast of an increase of 2.8MMbbls; whilst distillate stockpiles rose by 1.4MMbbls last week, compared with expectations for a build of 2.7MMbbls.
The latest data from China’s National Bureau of Statistics showed that crude oil processing increased around 5% month-on-month to 14.6MMbbls/d in November 2022 as demand for Chinese fuel products in the overseas market increased further. China’s refined products exports increased to 6.1mt in November, the highest in more than a year and up 38% compared to October exports. Meanwhile, domestic demand for crude oil continues to be soft with apparent demand falling 2.5% year-on-year to around 13.8MMbbls/d. The Covid-19 spike this month and previously-imposed restrictions may keep domestic demand under pressure in December and crude oil demand could remain soft in the country in the short term.
https://think.ing.com/articles/the-commodities-feed-section-of-keystone-pipeline-restarts
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