Alternatively, it’s the reopening in the US that seems to be buoying sentiment. This morning NYMEX WTI is trading at its most distinguished levels after early March, with the market trading comfortably over US$67/bbl.
The narrowing in WTI’s discount to Brent is proof of a relatively more constructive market. WTI was lately trading at a discount of less than US$2.50/bbl to Brent. This is the closest this spread has been after early December. The demand forecast for the US remains supportive, with the economy proceeding to reopen.
At the same time, we are also on to officially enter the summer driving season, which should further boost gasoline demand. After March last year, the 4-week average demand for gasoline lately converged at the 9MMbbls/d mark for the first time.
Nevertheless, the market mustn’t get too caught up in the more favorable demand outlook for the US, as elsewhere, there are still matters. Several countries in Asia seem to be going the wrong way, so alternatively, we see more tightening of easing restrictions. In Australia, the state of Victoria yesterday performed a week-long lockdown, flaring up in coronavirus cases in Melbourne.
Aside from demand, the other factor that the market demands to keep a close eye on is how Iranian nuclear talks proceed.
Industrial metals rebounded after reports that President Biden is preparing to reveal a US$6t budget for the coming fiscal year. LME base metals increased nearly 3% after the news. LME 3M copper passed to above US$10,000/t yesterday and proceeded to find support from increasing supply risks in Chile.
Reuters stated that a union of remote workers for BHP’s Escondida and Spence mine stepped off the job early on Thursday. In computing, the market received a warning of possible supply risks from China. Chinese Vice Premier Han Zheng guarantees that China runs its target for peak carbon discharges through 2030 and net-zero by 2060 on time.
Supply risks have increased after Baotou city was disappointed to catch the so-called ‘dual control’ target. Meantime, both aluminum and zinc smelters from Yunnan province have been required to decrease operations because of a power shortage.