Demand Concern and Saudi OSP Cut Weigh on Crude Despite Supply Risks

Crude front month is weaker today to reverse gains from Friday but with no clear direction as strong non-OPEC supply and estimates of slowing global demand growth this year are weighed against supply risks from the Middle East and Libya.

• Brent MAR 24 down -1.2% at 77.83$/bbl
• WTI FEB 24 down -1.3% at 72.83$/bbl
• Gasoil JAN 24 unchanged at 765.75$/mt
• WTI-Brent down -0.04$/bbl at -4.92$/bbl
• Broader risk aversion in the HK/China equity space and a cut in Saudi Arabia OSPs to all regions over the weekend has added to the bearish pressure. The Arab Light price to Asia was cut more than expected by $2/bbl.
• Red Sea transit numbers are about 15% lower than on average in 2023 but overall the majority of vessels are still passing through the Red Sea according to Vortexa last week. Maersk last week extended the suspension of all Red Sea transit for the foreseeable future with ships diverted around southern Africa amid risks from Houthi attacks. US Secretary of State Blinken will meet with key figures starting today in Abu Dhabi, including the U.A.E President and Saudi Crown Prince in a bid to avoid further escalation.
• Libya’s oil output has fallen due to the outage at the Sharara oil field cutting flows to the Zawiya export terminal. Libya’s NOC declared force majeure at the field due to protests.
  • Brent MAR 24-APR 24 unchanged at 0.22$/bbl
  • Brent JUN 24-DEC 24 down -0.07$/bbl at 1.82$/bbl
• The prompt WTI is pulling again today after gaining ground last week back up close to parity having held in contango since the start of December. The longer dated Jun24-Dec24 spreads are holding in backwardation after seeing gains in the second half of Dec.
• US gasoline cracks are again drifting lower today to the lowest level since Dec 12 with a fall of around 13.8% last week amid a decline in demand data and with rising stocks adding to the downward pressure on cracks.
  • US gasoline crack down -0.2$/bbl at 14.29$/bbl
  • US ULSD crack up 0.5$/bbl at 36.55$/bbl