Crude Steady With Demand Concern Set Against Geopolitical Risks to Supply

Crude markets are holding steady after gains yesterday as the market weighs demand uncertainty and Hawkish US Fed comments suggesting rate cuts are not imminent against risks from Middle East tensions and drone attacks on Russia’s energy infrastructure.

• Brent APR 24 up 0.2% at 78.18$/bbl
• WTI MAR 24 up 0.2% at 72.96$/bbl
• Gasoil FEB 24 up 2.2% at 836$/mt
• WTI-Brent unchanged at -5.14$/bbl
• The US intends to undertake further strikes in retaliation for the US personal killed by an Iranian backed militia according to the State Dept. The market is watching for signs of any progress in ceasefire talks between Hamas and Israel after optimism added downside pressure to prices last week.
• Saudi Aramco has kept the OSP of Arab Light to Asia unchanged at a $1.5/bbl premium to Oman/Dubai benchmark and most other grades were also left unchanged. Saudi Arbia needs oil prices to average at least $90/bbl for it to balance its 2024 budget, according to Fitch. This increases the chance that its output cuts will be extended into Q2.
• The return of strong US supply following cold weather disruption in Jan and limited compliance with production cut targets from some OPEC members also weighs on prices to offset geopolitical risks.
  • Brent APR 24-MAY 24 unchanged at 0.26$/bbl
  • Brent JUN 24-DEC 24 up 0.03$/bbl at 2.04$/bbl
• The crude curve backwardation has regained some strength after softening last week but WTI Jun-Dec spread is still near the lowest since Jan 17 while the WTI prompt spread holds a narrow contango.
• Cracks spreads gained yesterday with support from tighter supplies and refinery outages to help offset uncertainty over demand. Clean petroleum product flows have been impacted with a significant decrease in takers transiting the Suez because of Red Sea transit risks.
  • US gasoline crack up 0.1$/bbl at 20.13$/bbl
  • US ULSD crack up 0.3$/bbl at 42.02$/bbl