Crude Extends Gains Following OPEC Cuts

Crude continues to edge higher following the surge yesterday in reaction to the announced 1.66m voluntary production cuts by several OPEC members including Saudi Arabia and Russia from next month.

• Brent JUN 23 up 0.4% at 85.25$/bbl
• WTI MAY 23 up 0.4% at 80.75$/bbl
• Gasoil APR 23 up 0.1% at 790.25$/mt
• WTI-Brent down -0.05$/bbl at -4.48$/bbl
• The cuts were first discussed on 20 March following the oil collapse due to the banking sector concerns according to Bloomberg. Kuwait oil minister said the cuts are a pre-emptive move to support markets amid global economic conditions and Russia’s Novak said the OPEC group see a supply overhang in the global oil market.
• Many analysts expect the market to tighten in the second half of this year driven by a recovery in Chinese demand. The voluntary nature of these cuts will make a reversal quick to implement if the market starts to rally strongly. Goldman Sachs raised their forecast after the announced cuts, but Morgan Stanley have revised forecasts lower due to softer than anticipated demand.
  • Brent JUN 23-JUL 23 up 0.01$/bbl at 0.39$/bbl
  • Brent JUN 23-DEC 23 up 0.1$/bbl at 3.53$/bbl
  • Brent DEC 23-DEC 24 up 0.16$/bbl at 5.72$/bbl
• Crude backwardation also continues to strengthen with the jump in time spreads yesterday driven by the concern for a tight market later this year. The Brent Dec23-Dec24 spread is trading at the highest since November while the prompt WTI spread is back at parity for the first time since December.
• Diesel and gasoline margins are steady today after trending lower over the last week as US refineries are gradually returning following maintenance and with concerns for weak demand.
  • US gasoline crack up 0.3$/bbl at 35.91$/bbl
  • US ULSD crack up 0.2$/bbl at 31.77$/bbl