MOSCOW (MRC) -- Oil prices have quickly climbed to levels that raise the risk of price falls as demand is fragile, Morgan Stanley said, as benchmark crude hit its highest in three months, said Hydrocarbonprocessing.
Oil climbed on Monday after major producers agreed to extend a deal on record output cuts to the end of July and as China’s crude imports hit an all-time high in May.
The bank said its base case expectation remained that oil markets will be progressively under-supplied in the second half of this year and inventories will shrink in the fourth quarter and first quarter next year.
But it said in a note the rally “appears mostly supply- rather than demand-driven, and it is questionable how strong refinery runs can increase against this backdrop”.
Refining margins are historically low and inventories of oil products remain elevated relative to crude oil inventories, suggesting the demand recovery is relatively fragile.
Consumption is unlikely to return fully to pre-coronavirus levels until the end of 2021, Morgan Stanley said, adding that inventories are unusually high after the increases in April.
Growth from U.S. shale could return to levels that are too high, if the U.S. benchmark WTI trades too far above the low-USD40s, it added.
The bank also sees a risk to OPEC’s compliance with supply cuts that have led to unusually high levels of spare capacity. “When the cuts are eventually unwound, production could rise sharply,” it said.
As MRC infomed earlier, the fall in Russia's GDP in non-working April 2020 is estimated at 12% in annual terms after growth, according to updated data, by 0.8% in March, 2.6% in February and 1.6% in January. As a result, in January-April 2020, according to the ministry, the RF GDP decreased by 1.9% in annual terms after an increase of 1.6% in January-March.
As MRC informed earlier, Russia's output of products from polymers grew in April 2020 by 11.2% year on year due to quarantine restrictions. However, this figure increased by 3.4% year on year in the first four months of 2020. According to the Russian Federal State Statistics Service, April production of unreinforced and non-combined films decreased to 107,000 tonnes from 110,400 tonnes a month earlier. Output of films products grew in the first four months of 2020 by 12.5% year on year to 402,800 tonnes.