Chinese Zero Covid Policy Sends Crude Lower

Crude is falling with Brent to the lowest since mid Feb after yesterday reversing the previous gains from the OPEC cut.

• Brent NOV 22 down -1.4% at 91.53$/bbl
• WTI OCT 22 down -1.7% at 85.42$/bbl
• Gasoil SEP 22 up 0.2% at 1081.5$/mt
• WTI-Brent down -0.13$/bbl at -6.48$/bbl
• The weaker market is driven by the expectation of an impact on Chinese oil demand from covid related restrictions and lockdowns as they persist with their zero covid policy. The underlying oil demand concerns continue with wider global economic risks from central back tightening and a stronger dollar.
  • Brent NOV 22-DEC 22 down -0.06$/bbl at 0.8$/bbl
  • Brent DEC 22-DEC 23 down -0.39$/bbl at 8.7$/bbl
• The Brent prompt spread has fallen to the lowest since mid Aug after supply risks ease. Various supply risks such as Iraq, Libya and uncertainty over OPEC had driven the spread out as much as 2.1$/bbl. Other supply issues such as CPC flows, Iran nuclear deal delays and more possible future Russian disruption are keeping the forward curve in backwardation.
  • US 321 crack up 0.1$/bbl at 31.19$/bbl
  • US gasoline crack up 0.3$/bbl at 14.88$/bbl
  • US ULSD crack up 0.6$/bbl at 63.62$/bbl
• Crack spreads are relatively stable after diesel spreads drifted slightly lower yesterday following the weaker crude market trend.