Crude Higher as Supply Issues Outweigh Demand Concerns

Crude bounced back higher yesterday afternoon as supply issues outweigh concerns for global demand.

• Brent AUG 22 up 0.9% at 123.41$/bbl
• WTI JUL 22 up 0.9% at 121.97$/bbl
• Gasoil JUL 22 up 0.6% at 1275$/mt
• WTI-Brent down -0.14$/bbl at -4.1$/bbl
• Russian supply is estimated to fall by between 1-1.5mbbls in the second half of this year. Libyan production is currently about 1mbbls below Q1 volumes with most fields closed except for the Hamada field and the Mellitah complex. Other OPEC members especially Nigeria and Angola continue to struggle to produce close to their quota targets. Saudi Arabia, UAE have spare capacity but will not raise output independently and US drillers continue to maintain capital discipline rather than push for production increases.
• On the demand side, concerns regarding global growth had pushed crude lower late last week and early yesterday. Markets reacted to the high US inflation data and followed a wider markets selloff with the possibility of a US economic slowdown. Chinese demand remains very uncertain with the chance of further lockdowns restricting their demand recovery.
• Crude backwardation had maintained despite the fall in flat price futures and has picked up further following the crude pricing higher.
• Brent AUG 22-SEP 22 up 0.03$/bbl at 3.23$/bbl
• Brent DEC 22-DEC 23 up 0.22$/bbl at 14.83$/bbl