Crude oil prices rally ahead of presidential inauguration and stockpile data

Crude oil prices are rallying, even as the IEA estimates that its demand will decline in Q1’21 and 2021 at large. WTI futures are up by 0.69% to trade at $53.36. Similarly, Brent futures are trading at $56.26, which represents a 0.75% surge. The rising demand for the commodity in China has fuelled the positive sentiment triggered by Biden’s stimulus package. This week’s inventory data from API and EIA will help to substantiate the crude oil demand outlook.

China’s demand for crude oil surges

China is the leading crude oil importer in the world. As such, increased demand for the commodity in this Asian country captures the attention of the investors looking to trade oil.

Crude oil prices are reacting to China’s increased demand. On Monday, the National Bureau of Statistics indicated that the amount of crude oil processed in the country’s refineries increased by 3% in 2020. In 2019, the annual refinery output was about 410,000 bpd. Last year, the figure rose to 13.45 million bpd.

In December 2020, the output increased by 2.1%, which was a monthly record. Refineries processed around 14.13 million bpd. Increase in domestic consumption, coupled with the rise in exports, have contributed to China’s growing demand for crude oil.

2021 crude oil demand outlook

One of the key outcomes of the OPEC+ meeting in January was the pledge by Saudi Arabia to cut production by 1 million bpd. The move reflected its outlook of low crude oil demand in 2021. The International Energy Agency (IEA) outlook has strengthened the sentiment.

On Tuesday, the IEA reduced its estimates for the global crude oil demand as a result of the heightened coronavirus cases and lockdown measures in China and Europe. According to the agency, the demand for crude oil will increase by 5.5 million bpd. The figure represents a decline of 0.3 million barrels from December’s outlook.

Besides, the latest travel restrictions have led the IEA to reduce its Q1’21 estimates to 94.1 million bpd, down by 0.6 million barrels from December’s figures.

Upcoming US crude oil inventories data

Investors’ attention is now on this week’s US crude oil inventories data. The released figures will be helpful in validating or downplaying IEA’s numbers. On Wednesday, API will present its weekly numbers on the amount of crude oil held by US firms.

The data has been bullish for three consecutive weeks, resulting in the surge of crude oil prices. The last reading indicated a decline of oil stockpiles by 5.821 million barrels. Analysts had estimated a drop of 2.7 million barrels, which would have been better than the prior -1.663 million barrels.

Similarly, the EIA will release its weekly inventories data on Friday. For three weeks now, the figures have been in the green. The last number represented an inventories’ decline of 3.247 million barrels. The drop came as good news for crude oil prices. This week, analysts expect a reading of -0.280 million barrels.

Another major event that will shape the crude oil demand outlook is Biden’s inauguration and the stimulus package. In the event set for today, investors will be keen on the details of the $1.9 trillion relief package. The stimulus is set to fuel economic activities, thus pushing crude oil prices higher.