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Standard Chartered Forecasts Strong Rebound in Global Oil Demand

Despite recent fluctuations in oil prices and concerns over inventory levels, Standard Chartered predicts a robust recovery in global oil demand, particularly in the upcoming months of May and June.

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Oil prices have remained relatively stable despite fluctuations in U.S. crude inventories and easing concerns regarding potential supply disruptions in the Middle East. While a recent inventory build initially sparked fears of weakening oil demand, Standard Chartered estimates a much smaller increase in global inventories for April compared to previous years.

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In a positive outlook for oil markets, Standard Chartered forecasts a significant uptick in global oil demand, exceeding 103 million barrels per day (mb/d) in May for the first time and further increasing in June. The expected increase in demand is anticipated to lead to global inventory draws during these months, tightening physical spreads considerably.

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Moreover, Standard Chartered suggests that the Organization of the Petroleum Exporting Countries (OPEC) is unlikely to ramp up output in the near term, despite having room for additional production. This decision is attributed to the stall in the oil price rally, indicating OPEC’s cautious approach to market dynamics.

Looking ahead, concerns about demand and the macroeconomic environment are expected to dominate the next OPEC ministerial meeting. Standard Chartered predicts a draw in stocks during the third quarter if there is no increase in OPEC output, potentially compounding the price impact of previous inventory draws.

In addition to market dynamics, the imposition of new U.S. sanctions on Iran’s oil sector has raised concerns about disruptions in market fundamentals. The expanded sanctions target Chinese entities involved in Iranian oil trade, with potential ramifications for global oil flows. Despite potential impacts on fuel prices, Standard Chartered suggests that the Biden administration has the flexibility to implement these sanctions promptly, regardless of the upcoming U.S. presidential election.

Furthermore, while the natural gas outlook remains uncertain due to recent weather fluctuations, Standard Chartered indicates a potentially bullish trend in the U.S. gas market, driven by forecasted above-average summer heat across the country.

In summary, Standard Chartered anticipates a strong rebound in global oil demand, coupled with ongoing market dynamics and geopolitical developments, influencing the trajectory of oil prices in the coming months.

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