Crude Pulls Back on US Debt Ceiling and China Demand Concerns

Crude markets have started the week on a bearish note with uncertainty over a resolution to US debt ceiling talks and potential US recession as well as differing views on the potential rate of growth in China after weaker than expected April data.

• Brent JUL 23 down -0.9% at 74.87$/bbl
• WTI JUL 23 down -1% at 70.97$/bbl
• Gasoil JUN 23 down -2.1% at 674.75$/mt
• WTI-Brent down -0.01$/bbl at -3.9$/bbl
• On the supply side ongoing strong Russian output despite pledged production cuts is offset by the halted output from northern Iraq and concern for Canadian outages due to wildfires.
• Current voluntary OPEC production cuts are providing some price support with the next OPEC+ ministerial meeting scheduled for 3-4 June. The group has no current plans to cut targets further according to suggestions from Iraq earlier this month. Total OPEC exports of crude and oil products fell by 1.7mbpd by May 16 according to JP Morgan and Russian exports are expected to decline by late May.
• The G7 announced that it is going to improve enforcement of price caps on Russian oil exports while “maintaining global energy supply”.
  • Brent JUL 23-AUG 23 up 0.01$/bbl at 0.12$/bbl
  • Brent DEC 23-DEC 24 down -0.16$/bbl at 2.77$/bbl
• Prompt crude time spreads are holding steady today after recovering late last week from a fall earlier in the week but longer dated spread are following the move lower in the outright futures markets. The WTI June contract expires today.
• Diesel margins are softer with demand and wider financial market concerns weighing on the spreads. Low US inventory levels and potential for lower run rates in Q3 are however supportive of refining margins with gasoline seeing some more support ahead of the summer driving season.
  • US gasoline crack down -0.1$/bbl at 36.57$/bbl
  • US ULSD crack down -0.3$/bbl at 27.45$/bbl