TD Securities has indicated that Brent crude oil prices could potentially climb to $150 per barrel, disrupting the recent market calm, as U.S. crude inventories decline rapidly and refined product supplies tighten further.
Commodity strategist Ryan McKay noted in a report that recent market sentiment has been relatively optimistic, with geopolitical risks constraining speculative fund flows. Concurrently, shipments purchased from the U.S. and other regions in April have been arriving in Europe and Asia, alleviating pressure on the spot market.
According to TD Securities estimates, implied inventory drawdowns have averaged 1.3 million barrels per day since mid-March, accelerating to approximately 2.3 million barrels per day so far in May. Accumulated inventories could be depleted before September.
If issues are not resolved promptly, refiners in Asia and Europe may need to compete again for spot supplies.
Additional reductions in operating rates at Asian and European refineries could further tighten fuel markets.
Even if refineries postpone maintenance and the peak summer demand season has not yet arrived, U.S. refined product inventories could fall to stress-inducing levels within weeks if the current drawdown pace persists.
Against a backdrop of robust exports and strong refinery utilization, crude inventories are expected to continue declining throughout the summer, potentially approaching operational stress levels.
TD Securities stated that, until then, the only remaining balancing mechanism for the market may be demand destruction.
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