By Geoffrey Smith
Investing.com -- Crude oil prices rose on Tuesday, shrugging off another small downgrade to the global demand outlook on concentrating on positioning for an expected rally in 2021.
By 11:30 AM ET (1630 GMT), U.S. Crude futures were up 1.2% at $47.54 a barrel, while Brent futures, the global benchmark were up 0.9% at $50.73 a barrel, close to a new nine-month high.
Earlier, the International Energy Agency shaved its estimate for global demand next year by another 170,000 barrels a day, leaving it still more than 3 million barrels a day below 2019 levels.
However, the market took comfort from its prediction that demand for gasoline and diesel would rebound be within as little as 1% from their 2019 levels, owing to a broad recovery in the world economy.
The shortfall in overall demand comes mainly from kerosene, or jet fuel. The IEA said this would account for four-fifths of the estimated shortfall in demand next year, as air transport takes considerably longer to recover than travel by road.
Analysts have noted repeatedly during the latest surge in Coronavirus cases in Europe and the U.S. that strong demand for diesel has offset weaker demand for gasoline, thanks to a big increase in demand from freight companies whose deliveries are replacing car-driven trips to shopping malls.
It’s not clear how much longer this can be sustained. Deliveries are approaching their seasonal peak, while gasoline demand in the U.S. is down some 14% from the first half of December last year and trending lower as cities such as New York move to ever-tighter restrictions on business life and social gatherings, according to the blog dtn.com. New York Mayor Bill de Blasio warned that the city may have to stay shut down after Christmas, Germany, the Netherlands, Italy and London have all tightened their polcies this week.
However, not all the evidence points in one direction. According to a survey by GasBuddy, over one-third of Americans still plan to drive at Christmas, a form of transport that, if replicated at scale, is more fuel-intensive than flying.
“We’re expecting to see heightened driving activity across some of the most hard-hit areas of the coronavirus,” said GasBuddy’s head of petroleum analysis Patrick De Haan.
U.S,. Gasoline RBOB Futures were up 0.5% at $1.3254 a gallon, close to a four-month high.
At 4:30 PM ET, the American Petroleum Institute will release its weekly assessment of U.S. oil stocks, as usual.