OIL MARKET OUTLOOK

       Crude prices rebounded to above $73 a barrel last week along with gains in stock markets, encouraging US economic indicators and a huge drawdown in US crude stocks. West Texas Intermediate (WTI) closed the week at $73.89 a barrel, up $6.38 from a week earlier. Fridays intraday high of $74.72 was the highest level this year.
       Equity and commodity markets received support from optimism about an economic recovery after two US regional manufacturing indices showed growth for the first time in several months. Leading economic indicators also increased for the fourth straight month in July, and existing home sales in July rose to a two-year high. These positive data suggest that economic activity will start to recover soon, along with fuel demand.
       Support for crude prices also came from the unexpectedly large drawdown in US crude inventories. Stocks for the week ended Aug 14 dropped by 8.4 million barrels from a week earlier to 342.4 million, prompted by lower imports and higher refinery runs. Crude imports to the US fell 1.4 million bpd to an 11-month low of 8.11 million. A large US stockpile,lower Nigerian crude shipments, and tanker delays due to bad weather in the Gulf of Mexico, caused the significant crude drawdowns. US gasoline and distillate supplies also fell more than expected by 2.1 million and 700,000 barrels respectively to 212.6 and 161 million barrels following a rebound in demand.
       Refinery utilisation rose 0.5%toaround 84% of capacity.
       The Atlantic hurricane season gained activity during the week.Hurricane Bill, the first of the season,strengthened into Category 4 with winds of 135 mph on Wednesday and headed toward Bermuda and Canadas east coast over the weekend. There were no threats to oil production in the Gulf of Mexico.
       This week, crude prices will again track equity markets. Investors will be monitoring US economic reports that include consumer confidence, durable goods orders, new home sales, secondquarter GDP, personal incomes and outlays, and consumer sentiment.Second-quarter GDP for Germany and the UK, as well as Germanys Ifo survey and Eurozone sentiment, will also be watched. More positive data will support crude prices above $70 a barrel. However,downside risks will include short-term profit-taking and a rebound in US crude and product inventories from last weeks sharp declines. Hence, Thaioil estimates that WTI will trade within a range of $70-$75 this week.
       Despite gains in crude, gasoline prices in Singapore fell almost $3 last week to close around $81 a barrel. The gasoline market softened from the previous weeks spike, which was caused by unplanned refinery outages. Supplies were seen increasing after refineries in Taiwan resumed operation and India diverted gasoline cargoes from the West into Asia.This week, gasoline will receive support from a refinery outage in Vietnam last Wednesday, with more imports expected to cover the shortfall. Stockpiling in Indonesia and China ahead of holidays in the next few months will also keep the market tighter.
       Diesel fell more than $1 last week,settling at $79 a barrel last Friday. The market remained under pressure from weak demand and ample supply. Indonesia and Vietnam, the major importers in Asia, continued to keep imports at low levels, while arbitrage opportunities to move excess supply out of the region remained closed. This lifted diesel and jet fuel stocks in Singapore to record highs. The refinery shutdown in Vietnam is likely to last three weeks and support diesel in the near term.
       Thai Oil Plc, www.thaioil.co.th