By Barani Krishnan and Liz Moyer
Investing.com - Oil prices settled lower on Wednesday for a fourth straight day after the International Energy Agency said it will take another two years at least for global demand to return to pre-pandemic levels.
The U.S. Energy Information Administration, meanwhile, reported a fourth straight weekly build in crude stockpiles. It also cited higher inventories of gasoline and distillates for last week as refining activity picked up briskly from outages caused by the mid-February Texas snowstorm.
“Global oil demand, still reeling from the effects of the pandemic, is unlikely to catch up with its pre-Covid trajectory,” the Paris-based International Energy Agency, or IEA, said in its annual report.
In its monthly Oil Market Report, released separately on Wednesday, the IEA said inventories still looked ample despite producer alliance OPEC+ withholding between 8 million and 9 million barrels per day, or bpd, of regular production under output cuts aimed at bolstering prices.
The actions of the 23-nation OPEC+ — made up of the 13-member Saudi-led Organization of the Petroleum Exporting Countries and 10 non-OPEC nations steered by Russia — have helped crude stage a rally with few interruptions since the end of October that have added about 80% to prices.
Yet, the IEA’s caution on Wednesday that it could take another two years or more for the market to realize pre-pandemic demand could bring some pressure at least on prices, said John Kilduff, partner at New York energy hedge fund Again Capital.
“It certainly puts a lid on some of the froth in the market, from the perspective of jet fuel at least,” Kilduff told Investing.com.
Demand for jet fuel — the hardest hit segment of oil demand —will not return to 2019 levels at least until 2024, the IEA said, adding that business travel could be forever changed as online meetings which became a default during the pandemic could now become standard.
Gasoline demand worldwide likely saw its peak in 2019 because fuel efficiency gains and a shift to electric vehicles (EVs) “eclipse robust mobility growth in the developing world”, the IEA said.
While global oil demand is expected to be at 104.1 million bpd by 2026, consumption in 2025 was still projected 2.5 million bpd lower than the agency’s estimates from last year.
New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled down 20 cents, or 0.3%, at $64.60 per barrel after an intraday low at $63.69. WTI has lost 2.1% since its last positive close on Thursday.
London-traded Brent, the global benchmark for crude, settled down 39 cents, or 0.6%, at $68, after a session low at $67.23. Brent has lost 2.3% since Thursday.
The U.S. Energy Information Administration, or EIA, reported that crude inventories increased 2.396 million barrels last week, compared with analysts' expectations for a build of 2.96 million barrels.
Distillate stockpiles, which include diesel and heating oil, rose 255,000 barrels in the week against expectations for a draw of 3.379 million barrels, EIA data showed.
Gasoline inventories rose 472,000 barrels last week, compared with expectations for a 2.996 million-barrel draw.
The weekly refinery utilization rate improved by 7.1% to 76.1% of capacity, compared with the previous week’s 69% and the record low of 56% in the first reporting week after the February 17 Texas storm.
On the production front, the EIA retained a daily estimated output of 10.9 million barrels for last week, after the previous week’s drop to 10 million. That suggested that drilling for oil has normalized from the Texas disruptions, just like how refining activity was returning to normal.