Crude Edges Lower After Surging Amid Supply Risks

Crude prices are edging lower after surging yesterday due to the risk to future supplies due to Middle East tensions adding to the existing tight market supply. The impact of events in Israel on oil flows is currently highly uncertain but there is no immediate impact on crude flows expected. Iran denies any involvement in the Hamas attack but its possible connection potentially adds a risk premium to oil prices after the country has increased output this year amid easing US sanctions.

• Brent DEC 23 down -0.6% at 87.6$/bbl
• WTI NOV 23 down -0.6% at 85.83$/bbl
• Gasoil OCT 23 unchanged at 891.25$/mt
• WTI-Brent up 0.01$/bbl at -3.51$/bbl
• Although focus has switched from demand to supply, possible future major central bank interest rate rises and the bearish impact from a stronger USD continue to limit gains.
• OPEC yesterday forecast oil consumption will rise 16% over the next two decades to reach 116mn bpd in 2045 – a 6mbpd rise over prior predictions, according to the 2023 OPEC World Oil Outlook. The OPEC monthly report is due out later this week along with the monthly EIA and IEA reports.
  • Brent DEC 23-JAN 24 down -0.04$/bbl at 1.61$/bbl
  • Brent DEC 23-DEC 24 down -0.33$/bbl at 8.26$/bbl
• Strong crude curve backwardation is reflecting the tight supply concerns although prompt spreads eased back after an initial surge yesterday while the longer dated spreads held onto the earlier gains.
• Diesel cracks have drifted down towards the lows from last week as the market assesses the partial lifting of the Russian fuel exports. Seaborne exports resumed on Saturday but are not allowed to exceed the average of the past 8-months. Gasoline cracks have seen some support since mid last week after a nearly four week decline driven by weak demand amid high US pump prices after the end of the peak summer season.
  • US gasoline crack up 0.4$/bbl at 8.05$/bbl
  • US ULSD crack down 0$/bbl at 38.71$/bbl