Crude Drifts Lower But Remains Supported by Tight Supplies

Front month crude futures are trading slightly lower today but still just net higher on the week as oil prices steady after the strong rally seen during July and August. Brent front month reached a high of just over 91$/bbl on 5 Sep.

• Brent NOV 23 down -0.3% at 89.68$/bbl
• WTI OCT 23 down -0.4% at 86.52$/bbl
• Gasoil SEP 23 up 1.6% at 959.75$/mt
• WTI-Brent down -0.02$/bbl at -3.82$/bbl
• US inventories yesterday showed another larger than expected draw offering further support after the extension of Saudi Arabia and Russia’s cuts until year end announced earlier this week.
• US crude stocks fell by 6.31mbbl and Cushing stocks by 1.75mbbl in the week ending 1 Sep to the lowest since December as tight supplies add downward pressure on global inventories.
• The OPEC supply reductions have driven Brent up from below 75$/bbl in June but analysts do not currently expect crude to break 100$/bbl this year amid global demand concern.
  • Brent NOV 23-DEC 23 down -0.01$/bbl at 0.66$/bbl
  • Brent DEC 23-DEC 24 down -0.12$/bbl at 6.71$/bbl
• The crude curve remains in strong backwardation reflecting the tight market concerns. Spreads have however softened in the last couple of days with the prompt spread actually trading lower on the week after surging higher last week. The Brent Nov-Dec spread has fallen from over 0.8$/bbl back to 0.66$/bbl but remains well above lows of 0.25$/bbl seen in August.
  • US gasoline crack up 1.3$/bbl at 24.68$/bbl
  • US ULSD crack up 1.1$/bbl at 49.74$/bbl
• Diesel and gasoline cracks found support yesterday after the recent gradual decline with EIA data showing US inventories still near the low end of the five year range. Concern for US gasoline demand at the end of the summer driving season has been weighing on prices although the upcoming refinery maintenance season could add support.