Crude Heading for Net Weekly Gain on Supply Risks and Demand Optimism

Front month crude prices are heading for a net gain on the week primarily driven by supply risks from an escalation in the conflict in Israel. Involvement from Iran is the main risk to oil markets with potential impacted supply greater than any increase in supply from Venezuela after an easing of US sanctions.

• Brent DEC 23 up 0.7% at 93.06$/bbl
• WTI DEC 23 up 0.9% at 89.14$/bbl
• Gasoil NOV 23 up 1.4% at 923$/mt
• WTI-Brent up 0.15$/bbl at -3.92$/bbl
• Comments from US Fed Chair Jerome Powell yesterday are also supportive with a slightly more positive economic picture and hope that there will be no further interest rate hikes.
• The US DOE yesterday announced plans to buy crude to refill the SPR at 79$/bbl or below out to at least May 2024. They aim to buy 6mbbls for Dec & Jan delivery following on from 4.8mbbls already purchase at less than 73$/bbl.
  • Brent DEC 23-JAN 24 down -0.01$/bbl at 1.36$/bbl
  • Brent DEC 23-DEC 24 up 0.41$/bbl at 9.31$/bbl
• The Brent prompt spread is net unchanged on the week but the Dec23-Dec24 spread is stronger in line with the moves in the front month futures. The Dec23-Jan24 spread has trended lower from a high of 2.11$/bbl in late September but at 1.37$/bbl is still well above levels seen in early September and before.
• The WTI-Brent spread continues to narrow after another draw in Cushing stocks towards operational minimum levels in EIA data this week.
• Gasoline cracks yesterday reversed earlier gains but still just higher on the week after tentative signs of stronger demand this week and with tighter supplies from refinery outages.
  • US gasoline crack down 0$/bbl at 9.39$/bbl
  • US ULSD crack up 0.1$/bbl at 43.28$/bbl