Crude Edges Higher on China Optimism With Russian Supply Risks

Crude is holding just above previous close levels as China relax more covid restrictions boosting optimism over Chinese demand and supported by a weaker US dollar. Upside moves are limited by concern for weaker global demand due to recession fears.

• Brent FEB 23 up 0.4% at 85.92$/bbl
• WTI JAN 23 up 0.4% at 80.32$/bbl
• Gasoil DEC 22 down -0.6% at 906.5$/mt
• WTI-Brent up 0.09$/bbl at -5.52$/bbl
• Concern for the impact of Russian oil supplies into next year is also supporting prices with any signs of curbs to Russia output likely to cause price spikes. The EU and G7 last minute price cap agreement at 60$/bbl is higher than the current Urals price so may not have as big an impact on Russian output as originally expected. ESPO crude which is typically sent to Asia is however currently priced above the cap level.
• Yesterday OPEC+ as expected agreed to maintain existing production targets with the JMMC next due to meet on Feb 1.
  • Brent FEB 23-MAR 23 up 0.03$/bbl at 0.05$/bbl
  • Brent JUN 23-DEC 23 up 0.02$/bbl at 2.13$/bbl
• Time spreads remain unchanged with the prompt still near to parity due to strong near term supply and weak demand. The rest of the curve remains in backwardation with uncertainty over future Chinese demand and Russian supply from the EU ban on Russian seaborne crude starting today.
• Gasoline and diesel cracks spreads are drifting lower with recession fears and central bank tightening weighing in product demand growth.
  • US gasoline crack up 0.2$/bbl at 15.99$/bbl
  • US ULSD crack down -0.3$/bbl at 52.8$/bbl