Crude Market Balances Recession Fears Against China Demand Hope

MNI (London) - Crude markets are steady today with hope for Chinese oil demand balanced against the downward pressure from recession fears and the impact of further central bank tightening.

• Brent FEB 23 down -0.3% at 78.78$/bbl
• WTI JAN 23 down -0.4% at 73.96$/bbl
• Gasoil JAN 23 up 0.1% at 887$/mt
• WTI-Brent up 0.01$/bbl at -4.57$/bbl
• Optimism for Chinese demand is driven by an easing to the covid policy and hopes to restore and expand consumption despite a surge in covid cases.
• Late last week the US announced plans to start restocking the Strategic Petroleum Reserves starting with a 3mbbl purchase for Feb delivery. The US have previously suggested plans to restock supplies when crude moves below 70$/bbl.
  • Brent FEB 23-MAR 23 up 0.05$/bbl at -0.4$/bbl
  • Brent JUN 23-DEC 23 up 0.06$/bbl at 1.92$/bbl
• The sanctions on Russia crude have so far had limited impact on output with India not expecting any disruption to flows. The front of the forward curve remains in contango suggesting healthy near term supplies. Longer dated time spreads are holding onto gains from last week on optimism for Chinese oil demand recovery next year. The Jun23-Dec23 time spread has risen from a low of 0.96$/bbl on Dec 12 to a high of 2.42$/bbl on Dec 15.
• Hopes for stronger demand are also supporting refined product crack spreads with diesel holding onto gains made last week despite a pull back late in the week. The US diesel crack is up from a low of around 43.5$/bbl on Dec 8 to currently over 57$/bbl.
  • US gasoline crack up 0.2$/bbl at 15.43$/bbl
  • US ULSD crack up 0.2$/bbl at 57.36$/bbl