Crude Edges Higher But Demand Risks to Downside

Crude and time spreads edge higher with support from “productive” US debt ceiling negotiations to potentially reduce the risk of a default. The uncertain rate of growth in China and risk of further central bank rate hikes is limiting upside moves as the market waits for signs of any possible further reaction from OPEC+ at the upcoming meeting on 3-4 June.

• Brent JUL 23 up 0.4% at 76.29$/bbl
• WTI JUL 23 up 0.4% at 72.36$/bbl
• Gasoil JUN 23 up 0.8% at 688.75$/mt
• WTI-Brent down -0.03$/bbl at -3.93$/bbl
• The current reduction in supply from OPEC and disruptions from Iraq and Canada are supportive while Russian seaborne output remains strong having increased for six consecutive weeks according to Bloomberg ship tracking data. The Russian exports are up by 15% since early April to nearly 4mbpd.
• High levels of Russian domestic refinery maintenance are pushing greater crude volumes onto the market and could represent a production cut of around 372kbpd.
• Iraqi pipeline exports to the Turkish port of Ceyhan show few signs of restarting with fields going offline or operating with reduced output. Crude pipeline flows from the northern region of Iraq of around 470kbpd halted on 25 March.
  • Brent JUL 23-AUG 23 up 0.01$/bbl at 0.13$/bbl
  • Brent DEC 23-DEC 24 up 0.04$/bbl at 3.13$/bbl
• Crude time spreads remain steady with longer dated spreads following the moves in the outright futures. Prompt spreads have regained some ground from last week with the prompt WTI returning into backwardation following the June contract expiry yesterday.
• The US gasoline premium over diesel is above the seasonal high with low stocks and cheap freight supporting the transatlantic arb and gasoline flows from Europe to US. Diesel cracks remain weak due to weak current demand and future demand concerns with the threat of a US recession while supplies have been boosted by recovering refinery run rates have and exports to Latin America facing competition from cheaper Russia supplies.
  • US gasoline crack down -0.2$/bbl at 35.35$/bbl
  • US ULSD crack down -0.5$/bbl at 26.98$/bbl