Crude Drifts Lower As Economic Concerns Outweigh Tight Supplies

Crude prices are drifting lower following the US Fed rate increase of 75 basis point and after comments from Chair Powell that rates could go higher than previously expected. Economic growth concerns have been limiting market upside despite concerns for near term tight physical supplies.

• A recovery in oil demand from China is uncertain as the country’s top health body said the zero covid strategy remains in place despite speculation early in the week that this policy could change.
  • Brent JAN 23 down -0.9% at 95.26$/bbl
  • WTI DEC 22 down -1.1% at 88.97$/bbl
  • Gasoil NOV 22 down -0.3% at 1051$/mt
  • WTI-Brent up 0.05$/bbl at -7.42$/bbl
• Yesterday crude had pushed higher with concern for tight supplies after the latest EIA data showed a crude stock draw. Gasoline stocks fell to the lowest since 2014 and distillate stocks remain near long term lows. OPEC+ target production cuts and concern for Russian output following EU sanctions also support the tight physical supplies.
  • Brent JAN 23-FEB 23 down -0.02$/bbl at 1.72$/bbl
  • Brent JUN 23-DEC 23 down -0.12$/bbl at 4.09$/bbl
  • Brent DEC 23-DEC 24 down -0.11$/bbl at 5.63$/bbl
• Gasoline cracks continue to edge higher after rallying strongly following the draw in US stocks and despite the fall in implied demand back to 2020 levels. Diesel cracks also gained ground following the EIA data but have turn back lower today driven by economic growth concerns.
  • US 321 crack down -0.1$/bbl at 37.45$/bbl
  • US gasoline crack up 0.4$/bbl at 23.7$/bbl
  • US ULSD crack down -1.3$/bbl at 64.14$/bbl