Crude Steady as Weak Demand Weighed With Possible China Stimulus

Crude markets are holding steady after a rally yesterday bringing front month Brent back higher on the week. Weak demand concerns in US and China are balanced against potential China stimulus, OPEC production cuts, strong recent demand in India and US plans to start refilling strategic reserves.

• Brent AUG 23 up 0.3% at 75.91$/bbl
• WTI JUL 23 up 0.3% at 70.83$/bbl
• Gasoil JUL 23 up 2.1% at 727.25$/mt
• WTI-Brent down -0.06$/bbl at -4.89$/bbl
• A potential broad package of stimulus measures is under consideration in China after recent weaker data. China's industrial output and retail sales growth showed below expectation in May while China’s apparent oil demand was also lower than April.
• China have issued the third batch of crude import quotas to independent refineries for 2023 and the central bank this week cut interest rates for the first time since August.
• The US Fed this week signalled the potential for more rate hikes this year due to persistent inflation.
• Sell side analyst views are leaning more bearish for year end Brent pricing in their latest forecasts citing factors such as buoyant sanctioned oil supply and wavering Chinese demand.
  • Brent AUG 23-SEP 23 unchanged at 0.01$/bbl
  • Brent DEC 23-DEC 24 up 0.1$/bbl at 3.16$/bbl
• The crude curve remains in narrow backwardation with concern for weak demand set against tighter supplies due to recent OPEC production cuts. The prompt WTI spread is showing the stronger contango since February and the Brent spread has fallen down to parity. The WTI-Brent spread continues to drift lower to nearly -4.9$/bbl.
• Diesel and gasoline cracks have resumed the trend higher after a dip earlier in the week with weak demand balanced against supply concerns from recent refinery outages and low US inventories.
  • US gasoline crack up 0$/bbl at 40.74$/bbl
  • US ULSD crack up 0.2$/bbl at 33.83$/bbl