China Optimism Halts Weak Demand Driven Crude Decline

MNI (London) – The decline in crude markets has been halted by optimism for China demand with some relaxation in covid related restrictions. Brent crude has fallen around 10$/bbl this week on economic slowdown concerns but has recovered by 1$/bbl so far this morning.

• Brent FEB 23 up 1.3% at 78.15$/bbl
• WTI JAN 23 up 1.4% at 73$/bbl
• Gasoil DEC 22 up 0.1% at 809.75$/mt
• WTI-Brent down -0.14$/bbl at -4.89$/bbl
• A build in US product inventories and weak implied product demand in data released yesterday added to the bearish sentiment. The latest weekly EIA data showed the four week distillate implied demand fell to the lowest level since 2015.
• Uncertainty over Russian crude output following the EU ban and 60$/bbl oil price cap is adding to market volatility. There is no clear reduction in Russian output yet but tanker flows are disrupted due to a growing blockage of 26 oil tankers in the Turkish straits. Delays proving valid insurance are causing tanker disruptions around the Bosphorus Strait.
  • Brent FEB 23-MAR 23 up 0.04$/bbl at -0.38$/bbl
  • Brent JUN 23-DEC 23 up 0.2$/bbl at 1.48$/bbl
• Time spreads are holding steady after also trending lower with the prompt spreads still in contango due to healthy supplies and current weak demand. The Jun23-Dec23 and Dec23-Dec24 spreads yesterday reached the lowest since late 2021.
• Weak product demand is weighing on the diesel and gasoline crack spreads with both falling further following the EIA data yesterday. Diesel crack spreads are the lowest since early August.
  • US gasoline crack up 0.2$/bbl at 15.4$/bbl
  • US ULSD crack up 0.8$/bbl at 45.22$/bbl