Crude Drifts Lower on Economic Slowdown Concerns

Crude is drifting lower with global demand concerns in US and China still weighing on the market despite the latest voluntary production cut from Saudi Arabia in July and potentially beyond.

• Brent AUG 23 down -0.7% at 75.73$/bbl
• WTI JUL 23 down -0.7% at 71.23$/bbl
• Gasoil JUN 23 down -1.2% at 692.25$/mt
• WTI-Brent up 0.02$/bbl at -4.39$/bbl
• Robust Russian export volumes are adding to the downside pressure with Energy Ministry data suggesting the country once again failed to meet the pledged 500kbpd production cut in May. Russian crude oil production stood at 9.66mbpd in May and was 418kbpd lower than in February according to Bloomberg calculations.
• The latest China export growth is weak, falling 7.5% y/y in May but import growth was better than expected at -4.5% y/y and crude imports rose 6.2% y/y.
• EIA yesterday forecast global oil inventories to fall slightly following the OPEC cuts in 2024 putting some upward pressure on crude oil prices. They expect US crude oil production to rise faster this year and demand increases would cool compared to prior expectations.
  • Brent AUG 23-SEP 23 down -0.01$/bbl at 0.19$/bbl
  • Brent DEC 23-DEC 24 down -0.07$/bbl at 3.44$/bbl
• Crude time spreads are also slightly softer today but are holding onto some gains following the OPEC announcement. The Dec23-Dec24 spread is holding just below the highest since late April but is still much lower than the levels seen after the voluntary OPEC cuts announced at the start of April.
• Upside in diesel crack spreads is limited by economic fears and concern for the impact of persistent inflation on the US Fed policy and potential future rate hikes. Gasoline cracks are stronger than diesel with support from low US inventories and the potential demand boost from the summer driving season as US imports from Europe increase on the week.
  • US gasoline crack up 0.1$/bbl at 35.38$/bbl
  • US ULSD crack down -0.1$/bbl at 27.41$/bbl