Crude Trades Lower As Higher than Expected Cap Considered

Crude and time spreads continue to fall after a 3$/bbl drop yesterday as the market considers the impact of the EU proposed oil price cap details and on weaker demand concerns.

• Brent JAN 23 down -0.7% at 84.84$/bbl
• WTI JAN 23 down -0.6% at 77.48$/bbl
• Gasoil DEC 22 down -1.1% at 915.75$/mt
• WTI-Brent down -0.03$/bbl at -7.37$/bbl
• A much higher than expected oil price cap suggestion of 65-70$/bbl is under consideration by the EU which may support higher Russian output at the end of the year and into 2023. Discussions are expected to continue today before any official EU/G7 announcement. More covid related lockdown restrictions in China and US recession fears are adding to the downside pressures with concerns for the impact on oil demand.
  • Brent JAN 23-FEB 23 down -0.08$/bbl at 0.19$/bbl
  • Brent JUN 23-DEC 23 down -0.16$/bbl at 2.64$/bbl
• Russian output has remained strong ahead of sanction on Dec 5 and supply is likely to maintain more than expected if the higher price cap is agreed with the level not far from the current Urals price. The prompt WTI time spread is back into contango with a boost to short term supplies. A reduction in capacity of the Zydeco oil pipeline on the US gulf coast until mid to late December, high freight rates and recent weather disruptions are all limiting exports and adding to the local supply glut.
• EIA stock data yesterday showed a build in oil product stocks but a draw in gasoline in the US East Coast region is supporting gasoline cracks. Despite the inventory increase, diesel stocks remain well below normal but low refined product implied demand data is helping limit upside price moves.
  • US gasoline crack down -0.1$/bbl at 22.44$/bbl
  • US ULSD crack up 0.3$/bbl at 59.74$/bbl