Crude Stable as Saudi Output Cut Offsets Weak Economic Data

Brent crude is holding around 75$/bbl having rallied up to around 76.5$/bbl in reaction to Saudi production cuts yesterday before falling back following weak US manufacturing data.

• Brent SEP 23 up 0.6% at 75.11$/bbl
• WTI AUG 23 up 0.6% at 70.22$/bbl
• Gasoil JUL 23 down -0.7% at 701.5$/mt
• WTI-Brent down -0.05$/bbl at -4.75$/bbl
• Crude initially rallied yesterday after the largely expected extension to the Saudi Arabia 1mbpd production cut into August and supported by the announced 500kbpd cut to Russia exports in August. The Russian export cut comes after the country earlier this year pledged to cut production by the same amount from a February baseline through 2024.
• Algeria has added to the cuts for August with a small extra 20kbpd reduction in output.
• Further central bank rate hikes due to persistent inflation is a risk to global demand while factory activity growth in China slowed in June and below expected US June ISM manufacturing data at the lowest since May 2020 has limited to upside moves.
  • Brent SEP 23-OCT 23 unchanged at 0.18$/bbl
  • Brent DEC 23-DEC 24 up 0.04$/bbl at 2.9$/bbl
• Crude prompt spreads are very slightly higher following the Saudi production cut although the impact was limited. The prompt Brent spread has recovered from a drop into contango mid last week but the prompt WTI spread remains negative. The Dec23-Dec24 is holding within the middle of the 1.7$/bbl to 3.9$/bbl range seen since April.
• US diesel and gasoline cracks have steadied after dipping lower yesterday weighed down by weak demand concerns while Galveston Bay looks to be ramping up gasoline production after a recent outage. Recovering Russian refineries following maintenance and strong India throughput are also helping support global supplies. Below normal inventories and the US driving season demand boost are limiting price downside.
  • US gasoline crack up 0.1$/bbl at 34.1$/bbl
  • US ULSD crack up 0.1$/bbl at 30.42$/bbl