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Growth in oil demand is accelerating as restrictions ease ahead of the seasonal rise in travel. Meanwhile, downside risks are rising in Asia (ex-China) as virus infections rise. OPEC+ will be vigilant about the risk of additional Iranian supply and take a cautious approach to increasing its production quotas. Despite this additional supply, strategists at ANZ Bank expect further drawdowns in global inventories. Sequential drawdowns in the second and third quarters will firm up prices.

US gasoline demand is set to surge over the summer driving season

“The outlook for road transportation fuels is improving strongly ahead of the northern hemisphere’s summer driving season. High vaccination rates have seen restrictions ease and mobility increase in the US and Europe. In fact, gasoline demand has now exceeded 2019 levels in many areas. This may be partly offset by weakness in Asia,which is suffering a wave of COVID-19. This should offset concerns of additional Iranian oil hitting the market.”  

“We see demand outstripping supply in the order of 650kb/d and 950kb/d in Q3 and Q4 respectively. This includes 0.5mb/d increase in Iranian output.”

“OPEC is likely to take a cautious approach at next week’s meeting. We expect the scheduled increase of 840kb/d in July to be ratified. However,the group is unlikely to provide any guidance on output in August. “

“Another 1mb/d of oil would certainly slow the current drain on inventories. This will ultimately limit the price rise.”  

“We maintain our year-end forecast of $75/bbl for Brent crude.”