Crude Drifts Lower on Demand Concern and Stronger US Dollar

Crude reversed direction late yesterday as optimism over future Chinese demand gave way to concern for further US Fed rate hikes and the economic impact on global demand growth. Crude has continue to drift lower this morning pressure by a slightly stronger US dollar.

• Brent MAR 23 down -0.5% at 79.27$/bbl
• WTI FEB 23 down -0.4% at 74.31$/bbl
• Gasoil JAN 23 up 0.2% at 882.5$/mt
• WTI-Brent down -0.1$/bbl at -4.68$/bbl
• China yesterday issued 111.82m tons of crude import quotas to refiners and traders in its second allocation for 2023 to help boost growth and recovery from covid restrictions.
• The prompt crude spreads remain soft suggesting ample supplies due to weak near term demand. Concerns for China demand due to high covid case numbers are adding to weak US demand data from sources such as EIA and GasBuddy. Longer dated spreads remain in stable backwardation supported by Russian supply disruption and the possibility of a demand recovery later this year. Russian crude output has drifted lower with four week average exports to 6 Jan down more the 500kbpd compared to before the start of sanctions on Russian crude.
  • Brent MAR 23-APR 23 down -0.02$/bbl at -0.26$/bbl
  • Brent JUN 23-DEC 23 down -0.03$/bbl at 1.55$/bbl
• Diesel and gasoline crack spread markets are holding relatively steady with supply risks offsetting near term demand concerns. Global diesel stocks remain below normal despite a recovery on recent months with concerns for future supplies following the EU ban on Russian refined products from 5 Feb.
  • US gasoline crack up 0.2$/bbl at 21.88$/bbl
  • US ULSD crack up 0$/bbl at 52.62$/bbl