Kyobo Securities "Crude Oil Supply and Demand to Gradually Improve from May to June"

OPEC Expects Supply and Demand Improvement from May
Refinery Operating Rates Anticipated to Recover in June-July

[Asia Economy Reporter Minji Lee] There is an opinion that crude oil supply and demand could improve starting from May to June. Considering OPEC's April monthly report, it is judged that the decline in demand will slow down in the second quarter compared to April.

On the 19th, Kyobo Securities forecasted that despite concerns about the saturation of global crude oil storage tanks in May, taking into account the effect of a 15 million barrel production cut by major oil-producing countries, the severe supply-demand imbalance could gradually improve from May to June.

According to the monthly report published by OPEC on the 16th, after experiencing a severe crude oil supply-demand imbalance in April, it is expected to gradually improve from May to June. Crude oil demand in April decreased by 20 million barrels per day, but in May to June, the decrease is expected to average 8 million barrels, indicating a rapid recovery of about 12 million barrels in demand.

Junghyun Kim, a researcher at Kyobo Securities, said, "The OPEC report published on the 16th came after a sharp drop in oil prices and an unprecedented large-scale production cut agreement," adding, "It provides insight into OPEC's changing perception of crude oil and petroleum product supply and demand."

Researcher Kim continued, "This supply-demand outlook is similar to the recent futures price trend," explaining, "Two weeks ago, the contango (futures prices higher than spot prices) for West Texas Intermediate (WTI) December to May contracts was below $12 per barrel, but now it has reached $14, indicating that the near-month contracts are in an oversold zone, so a rapid price recovery is expected."

Currently, due to stringent lockdown policies in major countries, global petroleum product demand is also sluggish. According to OPEC, the population under lockdown policies accounts for 40% of the global population, and due to movement restrictions, demand for gasoline and jet fuel is weak, leading to rapid inventory accumulation.

Currently, the operating rates of global refineries have dropped to about 20-40% on average, and refining margins in the US and Asia are sharply declining. Although Europe is experiencing similar demand weakness, refining margins are maintained due to the supply of cheap crude oil feedstock from the Middle East.

Researcher Kim said, "Since April, operating rates have been rising with the recovery of industrial production in China," and added, "OPEC expects the recovery period for global refineries' operating rates to be June or July, assuming the same time frame for China's operating rate recovery."

This content was produced with the assistance of AI translation services.