Crude Drifts Lower Ahead of US CPI After Rally on US SPR Refill Plans

Crude resumes the decline ahead of the updated US CPI data today with concern that an increase could raise the chance of further US rate hikes and of a US recession. Concern for future oil demand growth and US recession fears are combining with strong Russian output to outweigh tighter supplies and a potential China demand recovery.

• Brent JUL 23 down -0.9% at 76.75$/bbl
• WTI JUN 23 down -0.9% at 73.03$/bbl
• Gasoil MAY 23 up 2.2% at 690.25$/mt
• WTI-Brent up 0.04$/bbl at -3.77$/bbl
• Crude rallied late yesterday after the US announced plans to begin replenishing the SPR after the maintenance work this year. It is likely to take years to refill to pre war levels.
• The EIA have revised the outlook for US crude production down from the previous forecast with shale drillers continuing to show restraint. The production forecast would still represent a record high.
  • Brent JUL 23-AUG 23 down -0.01$/bbl at 0.16$/bbl
  • Brent DEC 23-DEC 24 down -0.2$/bbl at 2.96$/bbl
• Crude time spreads are also drifting lower today but remain relatively unchanged so far this week. The Dec23-Dec24 spread is holding above the lows from last week at 1.61$/bbl. Spreads remain much lower than levels seen shortly after the OPEC production cut announcement at the start of April.
• Refining margins are holding steady today after edging higher yesterday as diesel spreads recover slightly so far this month. Margins are still low with weak US manufacturing and freight activity and disappointing gasoline demand ahead of an expected boost from the US driving season. The US 321 crack spreads has recovered from the lows of around 27$/bbl seen early last week.
  • US 321 crack up 0.1$/bbl at 29.59$/bbl
  • US gasoline crack up 0.1$/bbl at 30.83$/bbl
  • US ULSD crack up 0.1$/bbl at 27.09$/bbl