Crude in Strong Backwardation Supported by China Optimism

Crude is holding just above previous close levels having seen a small correction last week from the two month rally driven by OPEC+ cuts and demand optimism. Crude had dipped back to nearly 92$/bbl but recovered late last week as Russia announced a temporary halt to gasoline and diesel exports.

• Brent NOV 23 up 0.6% at 93.79$/bbl
• WTI NOV 23 up 0.5% at 90.45$/bbl
• Gasoil OCT 23 down -0.1% at 981.5$/mt
• WTI-Brent down -0.08$/bbl at -3.34$/bbl
• Saudi and Russia output cuts have combined with optimism for demand in US and China to drive the crude bull rally in the last month amid a drawdown in global inventories. The rally has brought the psychological 100$/bbl round number into focus.
• The expectation of better economic data from China this week could help further support the market ahead of the Golden Week holiday. More than 21m people are expected to fly during the eight days to boost demand for jet fuel.
  • Brent NOV 23-DEC 23 up 0.12$/bbl at 1.43$/bbl
  • Brent DEC 23-DEC 24 up 0.15$/bbl at 9.47$/bbl
• Crude is maintaining a strong curve backwardation with the prompt Brent spread currently trading at the high from last week and the highest since November 2022.
• Diesel markets have steadied after the initial surge higher last week due to the Russian exports ban which is widely expected to only last a few weeks. Diesel markets remain supported by low inventories and refinery maintenance but strong exports from China and India this month have provided some downside pressure.
  • US gasoline crack up 0$/bbl at 15.66$/bbl
  • US ULSD crack down -0.3$/bbl at 46.66$/bbl